A Code of Good Practice on Incentivised Transfer Exercises (ITE) was today published by the Industry Working Group on Incentive Exercises. Developed by a wide group of industry representatives, the Code aims to improve the standard of ITEs and improve the protection of pension scheme members taking part in ITEs.
The Code has been developed in response to a call by the Pensions Minister, Steve Webb to improve the standard of ITEs for pensions to stamp out industry bad practice.
Steve Gay, Director of Life, Savings and Protection, ABI comments:
We must protect people from making pensions choices contrary to their long term interests. Where employees are offered to transfer out of their defined benefit scheme, the offer must be transparent without cash incentives likely to distort people’s choices. The ABI and its members fully support the Industry Working Group’s Code of Good Practice on Incentive Exercises. The Code will substantially improve the protection of pension scheme members taking part or considering taking part in Incentivised Transfers. The ABI expects all its pension providers to comply with all principles within the Code that are relevant to their business, and only transact transfer business undertaken in compliance with the Code of Good Practice. The ABI will continue to work with members and the Industry Working Group to support the development of the ownership, maintenance and monitoring of the Code”.
Minister for Pensions, Steve Webb comments:
“Whilst it is understandable that firms need to manage their pension liabilities this must be done in a way that enables scheme members to make informed choices about their pensions. The practice of offering cash incentives for people to give up valuable salary-related pension rights was a source of particular concern. I therefore very much welcome the work that has been done to come up with an industry Code to stamp out bad practice. This new Code of Practice must be adopted as the standard for all transfer exercises in the future, without exception”.
Joanne Segars, Chief Executive of the NAPF, comments:
“This code of practice will help to ensure people take the right decisions for their retirement. The industry has worked together to take this action and we think it will help protect savers and pensioners.
“This code sets a clear and fair standard. The NAPF strongly supports it and we will help to monitor compliance.
“This is a code of practice, not a detailed and prescriptive handbook. It is crucial that everyone complies with the spirit of the code, not just with its specific recommendations. The industry must also realise that if the code doesn’t work then regulation is likely to be the next step – and that is something it should try to avoid.”
Margaret Snowdon, Chair of the Industry Working Group, comments:
“This code has been designed by industry experts to improve the protection for pension scheme members involved in incentive exercises. The principles of the code will ensure that that good practice becomes the norm rather than the exception and it will help to restore confidence in incentive exercises as a legitimate liability management tool.
Alan Howard, a spokesperson for the Institute and Faculty of Actuaries comments: “We are pleased to have played a key role in the development of the Code. It represents a practical step forward for those involved in pensions and, if widely adopted, will lead to better outcomes for individuals who are offered transfers from final salary schemes.”
