View more on these topics

Voluntary ETV code rules out cash incentives

Employers will be banned from offering cash incentives to members of company pension schemes in return for giving up valuable benefits, under a new code of practice launched today.

The voluntary code, published by the Industry Working Group on Incentive Exercises for Pensions, says no cash incentives should be offered that are connected to a member’s decision to transfer their pension. It also requires employers to provide and fund advice by qualified and experienced advisers for transfers provide guidance when schemes are modified.

Association of British Insurers director of savings life and protection Steven Gay says: “We must protect people from making pensions choices contrary to their long term interests. Where employees are offered to transfer out of their defined benefit scheme, the offer must be transparent without cash incentives likely to distort people’s choices.”

The working group is supported by the ABI, the National Association of Pension Funds and the Confederation of British Industry. It was set up after pensions minister Steve Webb raised concerns last year about the growing number of people with company pensions who had been offered such arrangements.

Estimates provided by KPMG to Department for Work and Pensions last year suggest 80 per cent of transfers involve a cash incentive. The department says these cash incentives “significantly increase” the number of people switching pensions even when they have been advised it is against their best interest.

Webb says: “”Whilst it is understandable that firms need to manage their pension liabilities this must be done in a way that enables scheme members to make informed choices about their pensions. The practice of offering cash incentives for people to give up valuable salary-related pension rights was a source of particular concern. This new code must be adopted as the standard for all transfer exercises in the future, without exception.”

Under the code, employers will have to provide and fund advice by qualified and experienced advisers for all transfer exercises. When schemes are modified firms must either provide advice or use approved methods to set out the difference in value of pensions before and after the changes and provide “guidance”.

Other measures in the code include:

  • No backdating of Pension Increase Exchanges with the objective of creating an additional cash incentive to accept an offer;
  • Guidelines on valuing PIEs to show how the offer compares to the value of the existing pension arrangements;
  • Fair, clear and unbiased communication of offers to members;
  • Sufficient time and no undue pressure on members to accept an offer;
  • Greater protection for vulnerable members.



Advisers call for rethink of absolute return definitions

Advisers have called for a simplified definition for the absolute return sector after the Investment Management Association published three potential proposals for an overhaul of its current structure. The trade body is considering redefining and dividing the sector to group the funds alongside traditional asset-based sectors. One option being explored is to sub-divide the existing […]

Guardian picks Shalton for MD role

Guardian Wealth Management has appointed Marlene Shalton as managing director of its financial planning practice as the firm looks to expand. Former Bluefin Wealth Management IFA and current Institute of Financial Planning president Shalton will join Guardian on September 1. Guardian, an international IFA firm, is planning to open a UK headquarters in Cardiff this […]


Govt may look to tempt private investors with ‘growth bonds’

Savers could be offered tax breaks to transfer money held in bank accounts, building societies and investment funds into new Government “growth bonds” which would be invested in infrastructure projects. According to The Independent, Chancellor George Osborne has asked Treasury officials to draw up the plans which could offer similar tax breaks to Isas. The […]

In search of value? Banks and the sectors leading Europe’s recovery

By Rob Burnett, head of European equities, Neptune  After nine years of underperformance versus quality growth, Rob Burnett, manager of the Neptune European Opportunities Fund, believes that value strategies have reached an inflection point. Watch Rob discuss why he believes value is well positioned to resume its historical trend of outperformance. Click here to watch […]


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. Told you so

  2. This is 3 years too late!
    There must be many new cars on the road today and Caribbean Holidays enjoyed by ‘advisers’ and members alike who have busted their valuable, guaranteed promises with this ETV cash inducement scandal, without a care about tomorrow’s income. In this sorry climate who wouldn’t want to pay off their debts or just add to their woes when enticed by such cash offers? How have Trustees got away with it for so long?
    This should be made retrospective and Companies fined for shedding their liabilities so irresponsibly.

  3. About time.

    As commented above surely scheme Trustees should be held to task over this issue?

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm