Key Dates

Consultation and draft regulations issued on 26 October 2017.

Consultation response and final regulations issued on 26 February 2018.

The Occupational Pension Schemes (Preservation of Benefits and Charges and Governance) (Amendment) Regulations 2018/240 in force on 6 April 2018. Regulation 2(2) in force on 6 April 2018 (except for the provision removing the actuarial certificate option for DC to DC bulk transfers, which will come into force on 1 October 2019.

The DWP issued guidance for trustees on 30 April 2018.

Summary

The DWP has issued a consultation response and final regulations, following consultation in the autumn of 2017.

The changes made by the new regulations will apply only to "relevant money purchase rights" and will not be applicable to money purchase benefits with guarantees (including guarantees under assets held for the purpose of providing the benefits).

Actuarial certificate (scheme quality requirement)

• The requirement for trustees to obtain an actuarial certificate before a transfer may take place will be removed, provided that the transfer is of "pure DC" benefits and that there are no potentially valuable guarantees or options to be assessed. Following consultation, the option of using the actuarial certificate route will be removed from 1 October 2019 for schemes within the scope of the new regulations.
• Where the transfer is to an authorised master trust scheme, transferring trustees will be expected to exercise their fiduciary duties to act in the best interests of members.
• Where receiving scheme is not an authorised master trust scheme and the transfer does not come within the "connected schemes" exemption (see below), the transferring trustees will be expected to:
• review the receiving scheme, with the assistance of guidance from the DWP or the Pensions Regulator; and
• take advice from an "appropriate adviser" who is independent from the receiving scheme.
• In response to consultation, a further exception to the requirement to take advice from an appropriate adviser (see above) will apply where:
• the principal employer or controlling employer of the transferring scheme is a group undertaking in relation to the principal or controlling employer of the receiving scheme; and
• the transferring members are current or former employees of a group undertaking in relation to one of those employers.
• Following concerns raised in consultation that the conditions for being "independent" were too stringent, the DWP has amended the requirements so that:
• the restriction applies only in relation to advisory, administration or investment services provided to the receiving scheme; and
• the adviser must not have provided such services in the previous year (rather than within the previous five years).
• The consultation response clarifies that the DWP expects trustees to have discretion to use advisers who may not fully satisfy the independence tests in regulations (although trustees should consider these matters carefully). It gives the example of an adviser being paid a small amount for work 11 months previously by a participating employer of a master trust which is intended to be the receiving scheme in a bulk transfer.
• Where the employer has sole power to effect the transfer, it must comply with the requirement to take advice and must confirm to the trustees of the transferring scheme that it has done so.

Scheme relationship condition

• The requirement for the transferring and receiving schemes to be related will not apply in relation to transfers without consent of relevant money purchase rights.

Member protections

• Protections under the statutory charges cap will continue to apply where members are transferred without consent:
• from a scheme in which their investments are protected by the charges cap to a scheme in which the cap would not apply to them;
• from an investment fund or arrangement in which their investments are protected by the charges cap to a fund in which the cap would not apply; or
• on subsequent switches between arrangements in the new scheme.
• Following consultation, the regulations have been amended to allow a transfer without active member consent from a non-default arrangement to a new non-default arrangement without triggering the cap restrictions, where the member has expressed a choice as to where his/her contributions were allocated within the five years ending with the transfer date. The consultation response comments that trustees should nevertheless make all reasonable attempts to contact such members before the transfer and to confirm whether the member wishes to remain in an uncapped arrangement.

Follow up

The DWP issued guidance for trustees on 30 April 2018.

Date Accessed: 28/05/2022