On 10 December 2009 TPR called for greater scrutiny of transfer incentive exercises, warning trustees of the risks these pose to members’ benefits. TPR has stated that trustees should start from the presumption that such exercises and transfers are not in members’ interests and that if an employer is willing to encourage the transfer, the company’s gain is likely to be the member’s loss.

TPR recognises that the effect of the current economic climate on pension scheme deficits has led many employers to review the form of the pension provision offered to employees and this in turn has fuelled the level of activity in the de-risking and liability-management markets.

Since regulatory guidance on inducements was published in 2007, transfer incentives and enhanced transfer exercises have become more prominent and concerns have been raised over some activities, including:

  • the offer of advice paid for by the employer - on the condition that members take the advice;
  • excessive pressure to make a decision - sometimes with constant emails, telephone calls and even home visits;
  • the provision of misinformation, including a strong suggestion that the future of the scheme is at best uncertain and that it is in the interest of the member to transfer out; and
  • putting excessive time pressure on members to make a decision - suggesting that as there may not be enough money to go round, members must move quickly to take advantage of the offer.

TPR has urged trustees to engage with transfer exercises and to ensure that members are aware of the issues. It has also stated that it may use its anti-avoidance powers where employer behaviour raises particular concerns and trustees are asked to be vigilant.

View the press release.