Pension updates on new flexibilities, and defined benefit to defined contribution transfers

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New flexibilities

Employers and trustees should be considering how their pension schemes will approach the forthcoming legal changes to defined contribution pension schemes (DC schemes).

In relation to the new benefit flexibilities, decisions will be needed in relation to accessing DC funds from age 55, lifting restrictions on purchasing annuities at retirement, changes to lump sum withdrawals and the abolition of short service refunds from pension schemes. Whilst trustees do have powers to make various changes, employers should be involved in the decision making, as it relates to the design of the pension schemes to which employers contribute for the benefit of their employees.

Defined benefit (DB) to defined contribution (DC) transfers

Employers and trustees will also need to be prepared for dealing with member requests to transfer from DB to DC (members wishing to take advantage of the new DC benefit flexibilities). Members will need to take advice from an appropriate independent adviser (FCA-regulated). This raises several issues for pension scheme trustees (will trustees need to provide advice and if so, will they become ‘regulated’ in doing so?) and for employers, for example, will transfers-out have an effect on the remaining demographic in a DB scheme? Employers and trustees will also need to be ready to deal with member queries in relation to transfer options.


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