New incentives code for pension plan membersFollow @PwC_West
Responding to concerns that as a result of poor communication, lack of understanding or inappropriate persuasion, thousands of pension plan members may have made poor decisions on their pension savings, the Department of Work and Pensions set up a working party in November 2011 to establish an industry wide code of good practice on member incentive exercises.
The new code of practice announced last week recognises that member incentive exercises can both help employers manage their legacy pension liabilities and provide valuable options for members. These exercises include offers to members to transfer their benefits out of defined benefit pension schemes (known as enhanced transfer values) and offers to pensioners to give up inflation linked pension increases in return for alternative benefits.
It is in the interests of all concerned that members are able to understand whether an incentive exercise is in their best interests. The code of practice gives employers clear guidance on how they can continue to use these exercises to manage their pension liabilities whilst protecting members' interests.
This introduction of stricter governance, making the process more explicit and transparent will give employers and pension funds renewed confidence to continue using member incentive exercises.
Many employers have been waiting for clearer guidance on how they should design member incentive exercises and provide advice to members. It will take some time to digest and adapt to the new code, but I think this guidance now provides that clarity.
Email: Mark Packham
Tel: + 44 (0) 117 928 1199