The Department for Work and Pensions (DWP) has outlined plans to abolish transfers from final-salary schemes into personal pensions from 2012 onwards. If implemented, employers looking to offer transfer incentives to workers will have an 18 month period in which to do it.
Generally, most members of final-salary schemes will stay put, but there are some circumstances in which they might want to transfer, such as a fear that their employer will go bust and the scheme will be in deficit; or if they are in poor health and can get a higher income from an enhanced equity.
Furthermore, from April 2011 members of defined-contribution (DC) pensions will be able to draw their pension as and when they want, provided they have secured a certain minimum level of income. If final-salary members cannot transfer their pension into a DC scheme, they will not be able to take advantage of this flexibility.
Quoted in Personnel Today, Laith Khalaf, a pensions analyst at specialists Hargreaves Lansdown said : “If this proposal is adopted we can expect a firesale of final-salary liabilities in the next 18 months. Many companies are likely to seek to offload some of their liabilities by offering members incentives to transfer out while they still can.
“The Pensions Regulator could be in for a busy time making sure all such transactions are conducted properly and members’ interests are not compromised.”
The DWP consultation runs until 19 October.