18 January 2007 - DWP announces decisions on pensions transfer values
The Minister for Pensions Reform, James Purnell today announced the Government’s decisions on the way that pensions transfer values are to be calculated.
In a written statement, laid today, Mr Purnell announced that pensions transfer values will be calculated based on the expected cost to the scheme of providing the pension.
Mr Purnell said:
“After an extensive consultation it has become clear that the great majority favour this way of calculating pensions transfer values.
“This approach will mean that the success or sustainability of the pension scheme is not put in jeopardy by any transfers that do take place.”
The regulations will also provide that:
- The trustees of the pension scheme will be responsible for the determination of the actuarial assumptions used to calculate transfer values.
- The trustees will be required to determine the assumptions in the calculation of transfer values on a “best estimate” basis.
- The trustees will be required to use a discount rate in the calculation of transfer values which reflects a “best estimate” of future returns, having regard to the existing asset mix of their scheme.
- The trustees will continue to be able to reduce transfer values where the scheme is underfunded.
- The trustees will be allowed to deduct any reasonable administrative costs incurred from the transfer value.
- The trustees will have to provide members considering whether to transfer with more information.
The Government’s formal response to the consultation is being published today and it is intended that these new arrangements will come into effect in April 2008.
Notes to editors
- Under the current arrangements, responsibility for the calculation of pensions transfer values is delegated to actuaries and to their professional body, the Actuarial Profession. Guidance for actuaries on the calculation of individual transfer values is contained in the guidance note GN11.
- On 21 March 2006 the Government announced that it intended to legislate, to put the principles underpinning the calculation of individual transfer values into regulations.
- In June 2006 the Department consulted on approaches to the calculation of pensions transfer values. Sixty-nine responses were received. The response to the consultation is on the Department’s website at http://www.dwp.gov.uk/consultations/2006/
- The Government will publish draft regulations for consultation in the first part of 2007.
- GN11 is to be adopted by the Board for Actuarial Standards in April 2007, but it will continue to apply until the new regulations come into effect in April 2008.
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