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DB Pensions, TPR & Covid19 Trustee Guidance

In financially uncertain times comes the increase of unscrupulous scammers looking to prey on the fears of those who rightly have concerns on the impact any downturn may have on their pensions and investments. 

The impact of the current pandemic has seen a significant increase in volatility across the financial markets and many pension scheme members are rightly concerned.  The unfortunate reality is that many people are robbed of their hard-earned savings by scammers using sophisticated methods to prey on their fears and defraud them of their wealth by deception.

The Pensions Regulator’s message to Trustees

In a recent announcement intended to provide guidance to pension trustees in relation to the outbreak of the COVID19 pandemic, The Pensions Regulator (TPR) announced that there is currently a heightened risk of Defined Benefit pension members being targeted by scammers and unscrupulous Financial Advisors.  The guidance that TPR provided aimed to make trustees aware of the potential of members making transfer decisions based on panic and uncertainty, providing counsel of what they should do if they have any raised concerns.

Optional Suspension of CETVs

With this announcement TPR brought in emergency measures that allowed Defined Benefit schemes to suspend transfers for 3 months until 30 June with a view to this period being extended if appropriate. The scheme trustees still needed to report any breaches of the disclosure requirements, but no regulatory action would be taken over the 3 month period.

The suspension relates to both the provision of a new Cash Equivalent Transfer Value (CETV) quote and the payment of any existing guaranteed transfer values, even if the payment was being processed.  However, suspensions can only be applied with very good reason such as:

  • Administrative impact of a potential surge in demand for transfer values, possibly due to scams along with reduced staffing levels as a result of Covid19 and the subsequent negative impact on other administrative functions (eg pension payroll).
  • Volatility in the financial markets and a deterioration in funding levels leading trustees to review terms for calculating CETVs.

Trustees may also use the suspension period to review other benefit options such as cash commutation factors, early and/or late retirement terms.

Possible Extension of Suspension Period

An article in Money Marketing on 22nd April stated that this 3 month period may be extended if deemed necessary. It goes on to say that so far the experience of trustees has been mixed. Some schemes have seen no rise in the number of transfer requests. Others have seen significant increases, which leads to the concern that members of those particular schemes have been targeted by scammers.  Indeed, the article explains that some trustees have sought to block transfers which they feel have been requested under suspicious circumstances.  Taken at face value, this shows that the guidance issued by TPR has been somewhat effective.

Warning Members of Potential Scams

Recently (29th April) various financial press outlets reported that TPR have instructed trustees to contact scheme members directly in order to warn them over the risks of transferring their benefits out of DB schemes into DC plans given the current uncertainty caused by the impact of the pandemic. Indeed, this press release on the TPR website provides detail of their guidance to trustees and their obligation to inform members of the current risks associated with transferring their benefits out of their Defined Benefit pensions.

Guidance is only as good as the resultant actions taken.  It is therefore encouraging to learn via The FT Adviser website that XPS Pensions have launched a 'Member Engagement Hub' designed to provide a centralised communications point to help trustees and in-house administrators liaise with members in order to provide guidance in identifying potential scams. 

O&M’s Observations

So far at O&M Pension Solutions, we have seen no evidence that any of the members for whom we are producing Pension Transfer Value Analysis Reports have been impacted by a suspension. It may be however, that in the next few weeks we will have cases where the scheme trustees decide to apply a suspension. The scheme trustees may even apply a suspension after we have produced our report, or after the point where a member has submitted discharge forms.

Pension Transfer Analysis Reports Still Required

Regardless, clients will still require their Defined Benefit pensions to be reviewed in order to fully understand their retirement options and to appreciate the true value of the benefits potentially being given up.       

It is important to stress that our Transfer Bureau service is still receiving a steady flow of report requests and normal service is still being provided despite the current pandemic.  All staff are now working from home and have been for a number of weeks.  To date we are maintaining normal service standards.

What To Do If Unsure

If you are unsure about the impact any suspension may have on the production of CETVs and potentially any transfer requests, it is important to query this with the scheme in question before submitting a report request to our Transfer Bureau service.  


O&M Pension Solutions