This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.
Last month’s Pensions Update
noted that an industry code of practice on DB scheme incentivised transfer exercises was awaited. This has now been published and applies immediately to incentive exercises, other than those where an offer letter has already been made to members.
Although the Code is voluntary, Pensions Minister Steve Webb states in the foreword that he expects all DB scheme employers to follow it and that the Government does not rule out future legislation if necessary.
A key point is that the Code does not allow for any cash incentive to be paid which is dependent on the member accepting the transfer or benefit modification. Modest cash incentives may be offered only to encourage members to engage with the process. The Code does not apply only to enhanced transfer values and pension increase exchanges but to a large number of situations where the employer initiates benefit changes, e.g. a conversion of DB benefits to DC within the same scheme. The notes accompanying the Code provide brief examples and some sample processes and communications.