The changes, which shocked the UK finance industry when announced by Chancellor George Osborne in March, remove the requirement for retirees to purchase an income stream whether that be an annuity or through phased drawdown at retirement.
It has now been confirmed that the plans, which will come into force on 6 April 2015, will, in effect, be extended to those, such as public sector workers, which are in defined benefit schemes.
It should be noted a clause preventing those in unfunded public service defined benefit schemes will remain in place.
In practice, the Government has said it will not remove the option for those in defined benefit pension schemes to transfer to a defined contribution scheme as had been proposed in March, meaning all retirees can benefit from the changes.
When first announced, there were some who suggested the changes could spell the “death knell” for certain international pensions such as Qualifying Recognised Overseas Pension Schemes which have to some degree been marketed on the basis they remove the requirement to purchase an annuity or such like.
However, these early fears seem to have been unfounded and most agree QROPS still provide a useful tool in certain situations.
A number of QROPS providers were among those which made submissions to the Treasury over the proposed changes with, International Adviser understands, many calling for the flexibility to be extended to defined benefit schemes as has now happened.
In addition to extending the benefits, HM Treasury also said, as moving from a defined benefit scheme is a complex process and means giving up a guaranteed pension income, it must only be conducted by a Financial Conduct Authority authorised financial adviser.
An addition was made to this story on 22.07.14 to explain unfunded DB schemes are still prevented from transefer
