Pension schemes are being urged to send DB members looking to transfer a Covid-19 transfer warning letter highlighting the risks of doing so during the pandemic, following new guidance from the regulator
The Pensions Regulator (TPR) is asking trustees to send the warning letter telling them it is unlikely to be in their best long-term interests to transfer.
Since 2015, pensions freedoms have given scheme members more flexibility in how they can access their pension. Many have taken advantage of this flexibility and last year £34bn was transferred from DB schemes.
However, TPR is worried that with COVID-19 causing market volatility and an uncertainty for businesses and personal finances, pension members could be at risk of making knee-jerk decisions which hit their pensions.
TPR chief executive Charles Counsell says: “We are determined to do all we can to protect savers’ retirements from the unprecedented impact of COVID-19.
“A decision to transfer a pension pot that’s taken a lifetime to build is a very serious one and we’d urge members to be very, very careful making any transfer decisions at this time.
“That’s why for the foreseeable future, anyone who is looking to transfer their benefits out of their DB scheme should be sent a new warning letter to make them stop and think as well as point them towards free, impartial guidance available from The Pensions Advisory Service.”
The People’s Pension director of policy Gregg McClymont says: “We are living through a unique moment in recent history, with the economy having been locked down for the greater good, but at heavy financial cost to some individuals and households. The move by the regulator is to be welcomed. The problems in the DB to DC transfer advice market are now well known and understood.”
Dalriada Trustees professional trustee Vassos Vassou says: “Most trustees already highlight the risks to members of transferring and provide details of where they can get help with advice. Trustees recognise the pang of anxiety associated with members requesting transfers when our own instincts are telling us the transfer may not be in their best interests. The additional material the regulator is asking trustees to include in the information provided to members will provide sense and balance for members before they proceed with a what could be a life changing and potentially devastating decision.”