Government plans barring transfers from contracted-out defined benefit pensions schemes in to a QROPS is unfair to savers and in contravention to European Union policy, claims the National Association of Pension Funds (NAPF).
NAPF is now urging the government to let the transfers go ahead.
The comments are in response to a recent Department of Work and Pensions (DWP) consultation relating to the scrapping of defined benefit pension schemes (DB).
“NAPF and its members are supportive of the abolition of contracting out defined contribution schemes. This move will help simplify the complex interaction between workplace pensions and the state pension system,” said the NAPF consultation submission.
“We would urge the government to consider allowing transfers from contracted-out DB schemes to any HM Revenue and Customs-registered or QROPS post April 2012.
“Restricting transfers of this nature would be harmful because it would severely limit individuals’ ability to transfer their own pension rights to suit their needs and circumstances. It would increase administrative cost and complexity for pension schemes and it runs contrary to the European Commission’s portability agenda.
“Individuals choose to transfer their pension rights out of contracted-out DB schemes for many reasons. They may want to amalgamate their smaller pension into a single pot, they may have concerns about the future viability of their sponsoring employer or they may want to make use of facilities like income drawdown.
“This is not to say that transferring out of a contracted-out DB scheme would be in every members’ best interest. Individuals must understand the risks associated with transferring out of a contracted-out DB scheme and should be encouraged to seek independent financial advice before making their decision.”
