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.