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New guidance on transfer incentive exercises

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 mean: 

  • 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 are: 

  • 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 progressing.
  •  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.

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