The Pensions Regulator (TPR) has sent letters to defined benefit (DB) schemes encouraging trustees to consider cutting transfer values on offer when workers want to leave.
A freedom of information request submitted by Royal London revealed the letters have been sent to several large pension schemes that have been experiencing a high volume of transfer requests, as part of a drive to protect members from unsuitable transfers and from scams.
The letter also raised concerns that if trustees offer overly generous transfer values to those leaving the scheme, it could be detrimental to those left behind.
The letter said: "In light of recent events concerning your scheme sponsors, we would expect you to take advice from your scheme actuary about whether the basis on which the cash equivalent transfer value (CETV) are calculated remains appropriate.
"This would allow you to judge whether a reduction of further reduction should be applied to CETVs in light of [an] assessment of covenant strength."
It is unknown to which schemes the letter was sent, however, from the various references to "uncertainty and speculation" and "concerns relating to the scheme moving into the Pension Protection Fund", some of the letters might have been sent to schemes where the sponsoring employers were regarded as being at some risk of insolvency.
According to Royal London, a particular concern raised by TPR appeared to be the situation where workers transferring out are offered a cash lump sum on relatively generous terms at a time when the pension scheme itself is it deficit.
Royal London director of policy Sir Steve Webb said: "I would hope that well-run pension schemes would be taking expert advice when deciding how much to offer to members wishing to transfer out.
"The regulator's letter is a helpful reminder to all schemes that they need to be fair not only to those transferring out but also those left behind, especially where the scheme in question is in deficit."
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