19 February 2007
The Actuarial Profession has written to the DWP and the Pensions
Regulator urging them to take action to ensure pension scheme
members are provided with appropriate information when considering
exchanging pension for a cash sum at retirement.
Gordon Sharp, Chairman of the Profession's Pensions Board said:
"We're concerned that some pension scheme members may be taking the
decision to exchange pension for a cash sum at retirement without
having a clear idea of the value of the benefits they are giving
up.
"We know that typical cash commutation terms can result in a
cash sum that is much less than the cost of replacing the pension
surrendered.
"Pension scheme benefits have become very valuable because
people are living longer and pension schemes enjoy greater legal
protection. We need to make sure people are getting the appropriate
advice to help them make these important decisions at a key point
in their lives."
In its letter, the Profession urges the DWP and the Pensions
Regulator to consider:
(1) implementing a requirement for a risk warning and suggestion
that members should take financial advice if they are considering
commuting a large amount of pension to cash; or
(2) subject to acceptable compliance costs, introducing
disclosure of cash commutation terms to members retirement benefit
statements so that members have an indication of the cost of
replacing the benefit foregone on commutation.
The Profession has also written to its own members recommending
they ensure their advice is up-to-date and that they clarify with
their clients their obligations to advise in this area.
