UK - The DWP yesterday announced that from April 2008 pension transfer values would be calculated according to the expected cost to the scheme providing the pension.
The Department for Work and Pensions' (DWP) announcement comes following concern that stricken schemes would face financial overburden if forced to pay departing members high enough transfer values to secure equivalent levels of benefits with a private insurer.
The announcement effectively means little change to the way pension schemes currently calculate pension transfer values.
Pensions reform minister James Purnell said: “After an extensive consultation it has become clear that the great majority favour this way of calculating pensions transfer values.
"This approach will mean that the success or sustainability of the pension scheme is not put in jeopardy by any transfers that do take place.”
Industry reaction to the announcement has been generally positive.
Punter Southall principal Joanne Livingstone said she "very much welcomed" the announcement, and added: “It is a straightforward and pragmatic approach that should allow schemes to continue with their existing approach of not paying out transfer values that are higher than the scheme can afford.”
Hymans Robertson partner and actuary Patrick Bloomfield said: “FD's will be breathing a sigh of relief... Alternative proposals could have been a back-door introduction of more stringent pension funding targets than currently apply."
However, Lane Clark & Peacock partner, Bob Scott, stated: "[The government} has opted for the line of least resistance, retaining the current philosophy but with subtle shifts in responsibility and with implementation deferred until April 2008.
He then cautioned: "In an ideal world, this would mean business as usual but, with the process due to be laid down in regulations, the pensions industry faces an anxious wait before we learn what further regulatory and compliance obligations and costs will be imposed on schemes as a result."
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