Pensions Regulator warns savers of increased transfer risks during Covid-19 pandemic
29 April 2020
Savers looking to transfer from a defined benefit (DB) to a defined contribution (DC) pension during the COVID-19 crisis will be warned that it is unlikely to be in their best long-term interests.
Under guidance published by The Pensions Regulator (TPR) today, trustees are asked to send DB members looking to move retirement funds a letter warning them of the risks during the pandemic and urging them to consider the decision carefully.
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 £34 billion was transferred from DB schemes.
However, 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 negatively affect their pensions.
Charles Counsell, TPR’s chief executive, said: “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.”
Since COVID-19 emerged, TPR has issued guidance to help schemes and employers deal with emerging risks and how trustees should be communicating with their members.
In this latest guidance, the regulator is calling on trustees to:
The regulator also warned about the risks from scams, considering people to be more vulnerable during the pandemic.
Law enforcement, government and private sectors partners are working together to encourage members of the public to be more vigilant against fraud, particularly about sharing their financial and personal information, as criminals seek to capitalise on the COVID-19 pandemic.
Most recent figures show that victims of pension frauds lost on average £82,000; for some this was their entire life savings.
The regulator said that trustees are the first line of defence in protecting retirement funds and have a key role in ensuring members make informed choices and urged trustees to follow the Pension Scams Industry Group code of good practice. The guide has practical steps for carrying out due diligence and assessing transfer requests and example letters for communicating with members throughout the transfer process.
Additionally, trustees should direct their customers to the ScamSmart website to learn how to protect themselves from pensions scams.
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