Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/new-model-adviser/article/a652220
Gov't seeks power to ban 'cash for pension' deals
by Brian Cantwell on Jan 21, 2013 at 10:20
The government could gain the power to ban companies from offering ‘cash for pension’ type deals to entice workers to transfer out of defined benefit schemes.
Under the draft pensions bill, the government will be allowed to prohibit enhanced transfer value (ETV) exercises that take the form of non-pension inducements.
‘The legislation will grant powers to draft secondary legislation to prohibit a non-pension inducement as an incentive for a defined benefit pension scheme member to transfer out of a salary-related scheme,’ it said.
The use of non-pension inducements is already subject to a voluntary code of practice drafted by the Association of British Insurers and the National Association of Pension Funds.
The bill states that the government would be granted the powers if the code proves to be ineffective.
‘The granting of powers will be dependent on the efficacy of the code of practice, with a monitoring board established to evaluate its effectiveness,’ it said.
Pensions minister Steve Webb has been a long-standing critic of ETVs, claiming he has seen many examples of bad practice by employers.
But Malcolm Small (pictured), director of policy at the Tax Incentivised Savings Association, was cautious about the move. ‘We’d be rather nervous of legislation being used to frustrate something that can sometimes be to the advantage of employees and employers,’ he said.
News sponsored by:
Today's top headlines
Challenged by growing risk aversion?
Challenging financial markets over recent years have resulted in growing risk aversion among British savers and led many to seek safety in cash. Click here for more.
More about this article:
More from us
- What do providers really think about ETVs?
- ABI backs charging code’s impact in face of growing advice gap
- Webb calls for 'urgent' review of consultancy charging