UK - Trustees of schemes in wind-up can transfer members' guaranteed pensions into a defined contribution vehicle without consent, a prominent pensions lawyer claims.
Hammond Suddards Edge solicitor Philip Sutton says this means trustees could order bulk transfer of deferred members’ benefits into a DC arrangement (Section 32 vehicle), which would “dramatically” reduce the time for scheme wind-ups.
Sutton said any scheme which started its wind-up after April 6, 1997 – when the Pensions Act was enforced – would make this provision, regardless of what is set out in its scheme rules.
He said: “It’s incredibly torturous reading, but we believe there is the power to do this in the Pensions Act.”
Sutton said trustees could make the mass transfers by setting a financial cap or an age limit for its deferred membership, transferring anyone to the DC vehicle who does not exceed it on wind-up.
He added: “A bulk Section 32 buyout of these people could be done on one sheet of paper. This will cut out most of the minutia checking of individual member’s benefits that is needed at the end of wind-up.”
Sutton’s interpretation of the law follows collaboration with Eggar Trustees, which is battling to speed up a number of scheme wind-ups.
Eggar Trustees director Vernon Holgate said: “There is some confusion over whether you can transfer member funds into DC vehicles because there is no single piece of legislation that gives a direct answer. The power to do this is not easy to identify and this perhaps explains why some advisors do not seem to be aware of its existence.”
HighamNobbs Consulting partner Russell Agius said that if Sutton’s reading holds true, GMPs for deferred members could be transferred into a DC scheme without consent.
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