UK: Bulk Transfers Of DC Benefits Without Member Consent Simplified From April 2018

From April 2018, it will be possible to bulk transfer pure defined contribution (DC) rights without member consent to an authorised master trust or to another DC occupational scheme on the advice of an appropriate independent adviser, as well as to DC schemes controlled by connected employers.

The Government has published details of the new regime. Finalised regulations now provide welcome clarity for trustees on the way forward.

Key action points for trustees

1. Transfers on the advice of an independent appropriate adviser

Bulk transfers to a DC occupational pension scheme will be possible without member consent, provided the advice of an independent appropriate adviser has been obtained and considered.

2. Transfers to a master trust

Transfers to a master trust authorised under the Pension Schemes Act 2017 will be automatically allowed without the need for an independent appropriate adviser's report.

3. Transfers between "connected" schemes

Transfers between schemes whose sponsoring employers are connected will also be allowed without the need for an independent appropriate adviser's report.

4. Charge cap constraints

Where members benefit from the statutory charge cap in the transferring scheme, charge cap protection must be in place in the receiving scheme.

Background

The Government called for evidence in October 2017 on the current system of making transfers without consent between DC pension schemes. That system impeded legitimate activity as the conditions for transfer were not designed with DC schemes in mind.

Our article explained the Government's initial proposals. Industry concerns have largely been addressed in the new regime.

The solution from 6 April 2018

The process of bulk transferring pure money purchase rights without the need for trustees to obtain members' consent is simplified. However, these rights must not include any guarantee or promise in relation to the amount of benefits to be provided or the amount available for the provision of the benefits. This means that money purchase benefits offering a guaranteed annuity rate or guaranteed investment return are outside the scope of the new regime and the existing routes for a bulk transfer without member consent (e.g. obtaining an actuarial certificate or satisfying the scheme relationship test) will continue to apply.

Transfers to authorised master trusts

A bulk transfer to a trust authorised under the Pension Schemes Act 2017, typically a master trust, will be automatically allowed. Advice from an independent appropriate adviser will not be required in this instance which will remove a barrier for several trustees/employers who wish to implement such transfers. However, trustees will still need to consider whether the transfer is consistent with their fiduciary duties in the usual way.

As a matter of practice, this mechanism is likely to become more useful when master trusts are fully authorised under the new authorisation regime expected to be in place by October 2018.

Transfers on the advice of an independent appropriate adviser

A bulk transfer to a receiving scheme will be possible without member consent provided the trustees of the transferring scheme first obtain and consider written advice in relation to the transfer from an appropriate adviser.

Who is an appropriate adviser?

This is a person whom the trustees reasonably believe to be qualified to give the advice by reason of that person's ability in, and practical experience and knowledge of, pension scheme management.

The Government has helpfully moved away from a requirement that this adviser must be "suitably qualified" in "financial" and "investment" matters (which was the requirement in the original draft regulations). The broader wording in the final regulations allows trustees more latitude in their choice of appointed adviser.

The advice must be received and considered "within the year ending with the date of transfer." A date-check will be necessary to ensure compliance.

Independence

The appropriate advisor must also be independent of the receiving scheme. This requires trustees to consider whether during the year ending on the date the advice was provided the proposed adviser received payment for services from the receiving scheme. For this purpose, "services" means advisory, administration or investment services.

The independence requirement is wide ranging and also extends to indirect payments, for example, in relation to payments received from the receiving scheme's employer (or a group undertaking).

Trustees will need to ensure that due diligence is carried out in relation to the proposed adviser, in relation to their experience and knowledge of pension scheme management and also their independence. If an adviser received a very small payment which resulted in the independent tests not being completely satisfied, the Government considers trustees still have the ability to use that adviser, although trustees should give these matters "careful consideration and weight".

The Government intends to produce high level guidance for trustees by the end of April, particularly around choosing an adviser and the aspects of the receiving scheme that should be taken into account when making the decision to transfer.

Bulk transfers between connected schemes

Bulk transfers without member consent can also be carried out without the need for advice from an independent appropriate adviser where there is a sufficiently close group relationship between the employers of the members being transferred and they are in controlling positions within their respective schemes. Independent advice will not have to be obtained where:

  • the principal employer or controlling employer of the transferring scheme is a group undertaking in relation to the principal employer or controlling employer of the receiving scheme and
  • the members whose rights are to be transferred are current or former employees of an undertaking which is a group undertaking in relation to the principal or controlling employer of the transferring or receiving scheme.

Charge cap constraints

The restrictions on charges imposed on members continue to apply where members' rights are transferred without their consent to a receiving scheme (or from one arrangement to another within a scheme). However restrictions on charges won't apply to members transferring from a non-default arrangement to another non-default arrangement, where the member selected an arrangement within the five years before the transfer.

Transfers under old regime must be completed by 30 September 2019

From 1 October 2019 it will no longer be possible to bulk transfer pure DC rights using the actuarial certificate process under the existing regulations. Until then, there is a transitional period which enables scheme to carry out DC bulk transfers using either regime.

Good to go?

The new mechanisms permissible from April 2018 are welcome. Trustees will, though, have to be mindful of their fiduciary duties when considering a bulk transfer under this route in addition to ensuring any required advice is obtained. This should, in most normal circumstances, be manageable.

Unfortunately there are still some areas where despite the new routes, bulk transfers remain problematic. These are typically in relation to members with A Day tax protections (being able to take benefits from age 50 rather than 55 and/or a tax-free lump sum above the current 25% limit). Trustees should ensure they understand the implications before engaging in a transfer exercise which relates to members with such protections.

That said, for plain vanilla cases, it is pleasing that the Government has found a workable solution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
7 Nov 2019, Seminar, Birmingham, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

14 Nov 2019, Seminar, London, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

Similar Articles
Relevancy Powered by MondaqAI
Wedlake Bell
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Wedlake Bell
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions