The Pensions Regulator (TPR) has urged UK pension schemes to delay processing defined benefit (DB) pension transfer requests for up to three months.
In light of recent market volatility following the coronavirus outbreak, this will allow trustees to revisit transfer valuations.
“For many schemes, the current funding position, calculated using consistent assumptions as for the valuation, will be significantly worse and the deficit materially larger,” the TPR said.
But since this is regulatory guidance, they are not bound to follow it.
Not compulsory
Peter Bradshaw, director at Selctapension, told International Adviser: “TPR has issued guidance to scheme trustees basically in order to preserve schemes from difficulties caused by market uncertainty around the coronavirus.
“Effectively, scheme trustees can defer contributions to schemes by initially three months. This is to avoid financial strain on the employer.
“Related to this, due to market turbulence, trustees can defer providing [cash equivalent transfer values (CETVs)] and transfers for initially three months.
“Both these items are guidance, not compulsory.
“Whilst the FCA have yet to rule/ban contingency charging until Q2/3, some firms who operate that business model will likely continue with it.
“The TPR guidance may prove to be a barrier to transfers and contingency charging in the short term.”
‘Difficult times ahead’
The coronavirus outbreak is already hitting people’s pockets, and many could turn to their pension pots for some liquidity.
Bradshaw continued: “There will be a conflict as people in uncertain times will want security and control over their finances. They may fear businesses going under and want to get their hands on their pension pots.
“Due to market conditions, transfer values may rise further.
“The TPR wants to protect and preserve schemes as funding may prove problematic, the FCA wants to protect scheme members from poor decisions, so both will discourage transfers in the short term, meaning there will be some difficult times ahead,” he added.
