The Pensions Regulator has detailed what it expects from defined benefit scheme trustees when members request a transfer ahead of an anticipated surge in activity from April.
New pension freedoms due to come into force in less than two months’ time are expected to provoke a wave of transfer activity as savers over age 55 with DB pots look to access their savings flexibly through a DC scheme.
In a bid to protect people from making poor choices, the Government has introduced a mandatory advice requirement for any member who wants to ditch DB benefits worth more than £30,000.
TPR says it will be up to scheme trustees to check that the member has taken independent advice from an FCA authorised adviser before allowing any transfer to go ahead. Advisers will be required to provide members with a written confirmation to enable the trustee to check appropriate advice has been given.
Members will be expected to meet the cost of the advice, except where it has been instigated by their employer.
However, trustees will not be responsible for checking what advice was given, what recommendation was made or to confirm whether the member is following that recommendation.
TPR interim chief executive Stephen Soper says: “The regulator believes that for most members, it is still highly likely in current conditions to be in their best financial interests to remain in their DB scheme. However members’ personal circumstances may mean they wish to consider the other options open to them.
“The provision of clear, timely information from trustees and the use of independent regulated financial advice will enable members to make informed decisions that suit their personal aims and circumstances.
“We will be working closely with the FCA as the advice regime develops, and producing guidance for trustees considering member requests at all points in their journey, for example decumulation options, to ensure those decisions are also well informed.”
In addition, the regulator expects trustees to carry out “proper due diligence” on the receiving scheme to ensure that it is a legitimate arrangement. This comes as fears mount the new freedoms could provide a fertile environment for pension fraudsters.