"The Government wants to see individuals in older ‘legacy’ pension schemes moved responsibly, in bulk, to more modern pension arrangements."
Currently, the transferring and receiving schemes must have a certain relationship and the actuary must certify that in their opinion the transfer credits to be acquired for each member under the receiving scheme are broadly no less favourable than the rights to be transferred. However there is currently no definition of what is meant by “broadly no less favourable” in legislation.
According to the DWP, many thought that the current arrangements are more suited to defined benefit and needed to be updated for the current DC landscape.
In particular there was concern that the current provisions on broad equivalence were difficult to interpret, and actuarial practices varied widely. Some stakeholders also found these provisions restrictive in that they prevented the movement of assets to more modern products which they felt to be in members’ best interests.
The DWP says it aims to ‘reduce unnecessary burdens whilst ensuring members are adequately protected’ and ‘allow providers of stakeholder pension schemes to transfer members to more modern and often lower cost schemes’.
This call for evidence comes close on the heels of the DWP and FCA review of industry progress with remedying poor value legacy workplace pension schemes which raised concerns over providers deferring improvements where customers haven’t engaged and offered explicit agreement.
Steven Cameron, Pensions Director at Aegon said: “The DWP consultation is further proof that the Government wants to see individuals in older ‘legacy’ pension schemes moved responsibly, in bulk, to more modern pension arrangements. Modern pensions can benefit members through lower or simpler charges, digital engagement, stronger governance and better or wider investment and retirement options.
“As the DWP rightly calls out, if providers must gain specific consent from every member, bulk transfer are very difficult, which is why we need to look afresh at responsible approaches to bulk transfers without member consent, not only protecting but strengthening member interests.
“While the DWP is focussing on occupational and stakeholder pension schemes which they have responsibility for, those in older personal pension schemes can also benefit from moving to more modern arrangement. It’s important that there are consistent standards that work across trust and contract based pensions and that all parties including DWP, FCA and HMRC work together to make sure as many ‘legacy’ scheme members as possible can benefit from bulk transfers.
“In other industries most consumers now expect regular product upgrades to the latest technology, service and pricing. With pensions some of the longest term investments there are, and with low consumer engagement, it’s important that the industry works with Government to deliver a mass ‘pensions upgrade’.”
