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Pension transfer values should be protected

Comment 2nd July 2010

 The problem

Under paragraph 2 of Schedule 1A to the Occupational Pension Schemes (Transfer Values) Regulations 1996 (SI 1996/1847) pension trustees are allowed to offer you a fraction of your full pension transfer value if you want to move your pension into another fund.

Example

My personal example is that I wanted to aggregate previous pension contributions from a previous scheme into my current pension. The pension administrators outlined that my 'full' transfer value was £38,000 but as the fund does not have enough assets to pay that they would only offer me £8,000 – a difference of over £30,000 – LESS THAN A QUARTER OF ITS ACTUAL VALUE.

I have checked with the Pensions Advisory Service and the Trustees and this action is quite legal and legitimate under the terms of the above Pensions Regulations from 1996.

Proposal

That paragraph 2 of Schedule 1A to the Occupational Pension Schemes (Transfer Values) Regulations 1996 (SI 1996/1847) is reviewed, revoked, and realigned so that individuals who, in good faith, pay into occupational pension schemes hoping to provide for their future independence from state, do not see their contributions made worthless by incompetent pension trustees.

Why does this matter?

 

Why it is important?

My idea is important because pensions are likely to be one of the definitive items on the political agenda in the next couple of years and it is essential that legislation is in place to reassure people that it is worthwhile providing for their future. State will not be able to fill the 'pension black hole' so it needs to ensure that individuals have confidence in the law when they are providing for their future and independence from state in their old age. What is the incentive to invest in a private pension scheme if, legally, trustees and slash the value of it by 75% if they have made a mess of things?

If someone took £30,000 from my savings account that would be fraud and they would face criminal charges. Pension companies can take such sums from their members to plug holes in pension funds that have come about through their own incompetence.

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