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Enhanced pension transfer values under scrutiny

The Pensions Regulator has today stepped into the fray regarding enhanced pension transfer values which are being used more and more by UK companies as a means of reducing their pension fund deficits for the future. In simple terms, members are given the option of transferring their pension funds from a specific scheme and in order to incentivise this potential transfer the value is enhanced with a "bonus".

The regulator is suggesting that while there are obvious benefits to members in the short term, perhaps the long-term benefits are to the underlying company pension scheme and all future pension fund transfers will come under further scrutiny. In many ways it depends where the enhanced transfer pension funds are transferred to and how they are invested as to their value in the future, but if they are going into a money purchase scheme then there are obvious risks regarding investment returns and annuity rates of the future - against final salary schemes where your benefits are defined.

It will be interesting to see how the UK pension fund industry reacts to this intervention by the Pensions Regulator as it will become a more prominent issue in the months and years ahead. There are many changes happening in the UK pension fund industry and this is just one element that is coming under more and more scrutiny.

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