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Regulator expresses concern about inducements to transfer out of DB schemes

24th January 2007 Print
The Pensions Regulator has outlined its concerns relating to the practice of inducement in guidance published today (Wednesday).

The guidance has been published to help employers, trustees and scheme members identify and fully understand the implications of inducements to transfer out of DB occupational pension schemes or to agree to rule changes leading to benefit reductions.

In deciding whether to transfer out, the regulator's guidance makes it clear that members will need to carefully consider the value of the inducement offer and the financial risks involved. Trustees must ensure that members are given all the information they might reasonably need in order to make an informed choice. Chief executive Tony Hobman said: "While we recognise that employers may not break any laws when they offer an inducement, whether it is cash payments or an increased transfer value, we are worried that some transfers are being proposed to avoid an employer's full pension liability.

"Trustees, in particular, have a duty to scheme members to take whatever steps they can to help ensure that members recognise the full impact of what is being asked of them. This should include encouraging members to take independent financial advice and to consider carefully the current and prospective funding position of the scheme."