Wednesday, 29 August 2018

Pension transfers 'too generous', says Pensions Regulator



Pension schemes have been asked to consider whether they are being too generous when offering lump sums to people thinking about cashing out of "defined benefit" retirement schemes.

 
It comes amid concern that overly generous payouts could damage the remaining funds.


The Pensions Regulator wrote to 14 schemes earlier this year, encouraging them to consider making reductions.


A record £21bn flowed out of defined schemes in the year to March.


Defined benefit schemes promise people a certain level of income when they retire, such as final salary pensions, and are often described as "gold-plated".
However, in recent years firms have been offering people large cash sums to transfer out, as it gets more expensive to cover their obligations.


The letter was obtained by Royal London, one of the UK's largest pension fund managers, following a freedom of information request.


Sir Steve Webb, director of policy at Royal London, said people were routinely offered 25 to 30 times their annual pension as a lump sum transfer value - but it could be as much as 40 times.


This could mean that for a £10,000-per-year pension, someone could be offered anywhere between £250,000 and £400,000.


The former pensions minister said such generous payouts might pose a risk if the pension scheme was in deficit, or if the employer faced financial difficulties.




BBC      News.