20 July 2012
The Pensions Regulator (TPR) has reviewed its guidance on
incentive exercises and replaced it with a short, principles-based
statement on incentive exercises.
A transfer incentive is an offer designed to persuade members to
modify their benefits in some way if they are in a defined benefit
(DB) or career-average (CARE) scheme. This could
- If they are still paying into the scheme, encouraging them to
move their pension to a new company scheme, which is likely to be
less favourable for them;
- If they have left the scheme, encouraging them to transfer
their pension to another scheme.
The regulator's five principles outlined in the statement
- 1. Clear, fair and not misleading. An offer
should be made in a clear, fair and not misleading way, to enable
members to understand the implications and make decisions that are
right for them.
- 2. Open and transparent. The offer
should be open and transparent, so that all parties involved in the
process are made aware of the reasons for the exercise and the
interests of the other parties.
- 3. Manage conflicts of interest.
Conflicts of interest should be identified and appropriately
managed in a transparent manner and, where necessary, removed.
- 4. Trustee consultation. Trustees should
be consulted and engaged from the start of the process, with any
concerns arising through the exercise alleviated before
- 5. Independent financial advice. Fully
independent and impartial financial advice should be made
accessible to all members and promoted in the strongest possible
terms. In almost all circumstances, the structure of the offer
should require that members take financial advice.
Find more information on the industry code here.
Read more about incentive exercises here.