Jack Jones talks to Margaret Snowdon, chairman of the working group set up by the department for work and Pensions to examine incentivised transfers
Bad practice in incentivised transfer exercises has been attracting increasing scrutiny, beginning with The Pensions Regulator’s order to trustees to treat them with suspicion last December (PP Online, 9 December).
It seemed to culminate this autumn when pensions minister Steve Webb repeated his determination to crack down on shady practices and announced the creation of a work- ing group to produce a code of practice by the spring (PP Online, 20 October).
Chairman of the working group Margaret Snowdon says the DWP – along with bodies such as the National Association of Pension Funds, the Association of British Insurers and Society of Pension Consultants – believe they can improve standards in the market.
“There is bad practice, but there’s also very good practice. It’s important not to throw everything out, because there’s a risk that if bad practice continues the whole thing could be stopped,” she explains. “The aim is not to ban these exercises but to make sure that good practice is endorsed by all the different stake- holders so there’s no hiding place.”
To this end, she says the board – one of the biggest she has ever worked on – will include representatives of all parties involved: employers, trustees, consultants, independent financial advisers, and anyone else in the industry involved with the exercises.
“We’re well aware of all the players and want to make sure nobody is left out on the sidelines saying ‘nobody’s asking us’,” Snowdon adds. The group will examine enhanced transfer values exercises, pension increase exchanges and total pension increases exchanges – drawdown-type arrangements that allow people to retire early without transferring out of a scheme.
She says that despite the pensions minister’s vocal opposition to the use of cash in incentivised offers, the working group will not focus on this specifically. “Steve Webb believes that cash is some- thing people tend to look at blindly, regardless of what else the circumstances might be – it makes people do the wrong thing. That’s part of what we’ll be looking at, but not the biggest part – that will be making sure the whole process hangs together,” she says.
“We’re looking more towards holistic advice than necessarily saying either cash is there or it’s not, but one thing is clear – if cash continues to be abused it won’t be around for much longer.”
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