DWP sets out trustee requirements for occupational pension bulk transfers

The Department for Work and Pensions has published new guidance that is intended to assist trustees in complying with the new regulations involving bulk transfers.

The guidance, Bulk transfers without consent, issued by the DWP today, 30 April 2018, details the conditions that are expected to be met when considering bulk transfers of certain money purchase rights of members of occupational pension schemes.

The department detailed certain circumstances whereby transfers without member consent can take place. These being: when transferring members to an authorised master trust, when the transfer is between employers who are within the same group of undertakings, as long as trustees comply with their fiduciary duties and where trustees of the transferring scheme have obtained and considered the written advice of an appropriate independent adviser.

The DWP explained that when commissioning an adviser, trustees should consider specific factors that they need to take into account when deciding to transfer. These include investment options, size, current membership and age of the scheme, the range of fund available for members to choose from, decumulation options, governance and administration, among others.

The guidance outlined that an “appropriate” adviser for this type of transaction would be any person, including legal or an advisory firm, of whom are “reasonably qualified” to provide advice on bulk transfers and have practical experience and knowledge of pension scheme management.

The paper set out how to determine whether advisers are independent in order to provide unbiased advice. Trustees must ensure the chosen adviser or firm has not been paid for advisory, administration or investment services in the year prior to advice being received. Confirmation from the adviser in writing that states whether these services have been carried out in the last year is encouraged, the DWP said.

Trustees are expected to obtain and consider written advice within 12 months ending with the date of transfer. However, the DWP said: “The advice cannot be relied upon to make a decision to transfer if it was not obtained and considered within 12 months ending with the date of transfer. A new assessment must take place in such cases in order to meet the statutory duty.”

Moreover, considering charge cap maintenance, the DWP’s guidance highlighted that members who are protected by the default arrangement charge cap in the transferring scheme must continue to be protected once they are moved into the receiving scheme.

On notifying members of their duty to move them into a nominated charge capped arrangement, trustees are able to notify members of alternative investment arrangements that they believe would be suitable alternatives and will be moved into a certain fund if an active choice is not made.

Furthermore, when comparing the transferring scheme with the receiving scheme, trustees are expected to consider value for members and that overall the scheme is in members’ interests. However, the DWP mentioned that “not every aspect of the receiving scheme must be equal or superior to the transferring scheme.” In cases where only certain members are being transferred, trustees should also consider those that are not transferred, the guide added.

The DWP noted that its guidance should be used in conjunction with the relevant section of The Pensions Regulator’s DC Code on assessing value for members.

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