The Government has issued its formal response to last summer's consultation document on the calculation of transfer values for members transferring from defined benefit pension schemes.
In summary, it is proposed that trustees of such schemes should:
- calculate transfer values by reference to the expected cost to the scheme of providing the alternative deferred pension benefits
- determine, on a "best estimate" basis and on actuarial advice, the actuarial assumptions to be used in the calculation
- use a discount rate in the calculation which reflects a "best estimate" of future returns, taking into account the existing asset mix of their scheme
- continue to have the power to reduce transfer values in cases of scheme underfunding
- be able to deduct any reasonable administrative costs incurred
- provide (as yet unspecified) additional information to any member considering whether to take a transfer from the scheme.
The Government has rejected alternative approaches to the calculation which may have been more generous to members choosing to transfer. It says that these would either have been to the detriment of remaining members, or would have imposed an unnecessary layer of costs on employers. The response therefore broadly confirms the "status quo" in this respect.
The Government has also accepted that the originally intended implementation date of April this year is no longer realistic. The new provisions will therefore be effective from 6 April 2008.
The response to the consultation can be accessed by clicking here.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 19/01/2007.