Employee Benefits Updates | DB to DC Pension Transfers | JLT

12 April 2015

Week ending 12 April: DB to DC transfers: Final guidance | Final charge cap guidance | Regulator updates detailed guidance for AE

DB to DC transfers: Final guidance

The Pensions Regulator has published its final guidance to assist trustees and managers of defined benefit pension schemes to manage member requests for transfers into defined contribution schemes and conversion of benefits within the same scheme.

The Regulator has also published its response to feedback received during its consultation on the guidance. It received 53 responses from representative and professional bodies, employers, trustees, advisers and individuals. Generally, respondents welcomed the guidance as a basis to prepare for the reforms and to understand the new financial advice requirements where a member’s ‘safeguarded benefits’ (such as DB benefits) have a cash equivalent transfer value of above £30,000 (the member is not required to obtain advice if the cash equivalent transfer value of their safeguarded benefits is £30,000 or less).

The final guidance draws together a number of important considerations for trustees and complements the Regulator’s existing guidance relevant to transfers. A high level summary of the main requirements introduced by the Pension Schemes Act 2015 is provided, along with the Regulator’s expectations in relation to these.

The final guidance aims to:

  • explain the new requirement for trustees to check that members have obtained appropriate independent advice before transferring or converting safeguarded benefits to DC benefits;
  • help trustees ensure they have appropriate processes in place to manage transfer requests;
  • prompt trustees to consider the impact of transfer values as part of an integrated approach to risk management of their scheme;
  • require trustees to provide clear information for members so that they can get independent advice on the best option for them.

The Regulator intends to review its guidance on transfers in 2016 in light of experience.

A Client Alert on the guidance is available.

Final charge cap guidance

DWP has published the final version of its guidance on the new 0.75% charge cap for default funds in qualifying pension schemes.

The guidance relates to the Occupational Pension Schemes (Charges and Governance) Regulations 2015 which took effect on 6 April 2015. From that date, the default arrangement within certain pension schemes used by employers to meet their automatic enrolment duties (‘qualifying schemes’) are subject to a cap on the charges which may be borne by scheme members. The charge cap is 0.75% of funds under management within the default arrangement, or an equivalent combination charge. The cap applies to all scheme and investment administration charges, excluding transaction costs and a small number of other specified costs and charges.

The non-statutory guidance provides an overview of how key elements of the Regulations work. Trustees and managers should consider the Regulations to determine whether the new requirements apply to their schemes, taking further advice where necessary.

Regulator updates detailed guidance for automatic enrolment

The Pensions Regulator has updated its detailed guidance for automatic-enrolment following changes that came into force from 1 April 2015. In addition to revised earnings thresholds for 2015/2016, other changes to the guidance notes include:

  • New alternative qualifying criteria for DB schemes.
  • Changes to the requirements for an employer to give information to workers, which aim to reduce the complexity of the provision of information requirements.
  • New legislative exceptions to the employer auto-enrolment duty.

A Client Alert on the auto-enrolment changes from April 2015 is available.


John W Wilson LLB(Hons) FPMI ACII, Head of Technical, JLT Benefit Solutions| Email: john_wilson@jltgroup.com