Pensions minister Steve Webb has warned that the Government will legislate against ETVs and pension increase exchange exercises if the industry fails to raise standards in the next 12 months.
Last month, Money Marketing revealed the Department for Work and Pensions planned to set up a working group charged with delivering a new framework for incentivised transfers from defined-benefit to defined-contribution schemes.
Pension increase exchange exercises involve the member giving up future increases in their pension for a one-off uplift in their payments. An employer undertaking an enhanced transfer value exercise will offer employees an enhancement or incentive to encourage them to switch from a DB to a DC scheme.
Addressing the NAPF conference in Manchester last week, Webb said: “My worry is that, if we do not do something now, thousands of people will get ripped off. I think there are already misselling cases in the pipeline and every day we do not do something the future misselling queue gets longer.
“We aim to have agreed and published interim guidance by next summer but if we have to legislate, that is what we will do.”
Webb said he is taking legal advice on ways to stop firms offering cash incentives to employees as an inducement to transfer out of a DB scheme.
Pensions Administration Standards Association chairwoman Margaret Snowdon will lead the working group. The NAPF, the CBI, the ABI, Aifa, the FSA and The Pensions Regulator will all be represented.
Webb said the goals of the code of practice are to ensure de-risking exercises are fair and transparent, communicated in a balanced way, available with independent financial advice paid for by the employer and provided with regulated access to independent complaint and compensation processes.