An amendment to the Pension Schemes Bill could see savers forced to obtain guidance before they are allowed to proceed with a pension transfer.
The amendment, brought forward by Baroness Stedman‑Scott, wants to make it mandatory for individuals to seek guidance from sources such as the Money and Pensions Service in certain circumstances, for example where advice is not compulsory.
Advice is compulsory on pension transfers worth more than £30,000 but not pension switches or transfers worth less.
The amendment states: “This amendment enables regulations under inserted section 95(6ZA) of the Pension Schemes Act 1993 to prescribe conditions about obtaining information or guidance from persons such as the Money and Pensions Service, before the trustees or managers may act on a member’s application under section 95.”
The rule, if implemented, would place further restrictions on and increase the time it takes to carry out a defined benefit transfer, as a transfer will not be able to go ahead until the trustees see evidence that guidance has been obtained.
The details of this amendment are not yet known, including whether it is designed for defined benefit transfers only, as it is due to be debated as part of the Pension Schemes Bill report stage in the House of Lords next week (June 30).
However, Tim Smith, lawyer at Herbert Smith Freehills, expects the rule to apply whenever individuals are not required to take advice to ensure they are as informed as possible before making decisions.
Mr Smith said: “I cannot imagine these regulations would apply where someone is already required to take advice.
“For example, these rules would be in place to protect those who fall below the £30,000 threshold for DB transfer advice.”
It could also help savers looking to do pension switching or to transfer from a workplace pension into a personal pension scheme avoid any potential scams, Mr Smith said.
Other amendments scheduled include a requirement for Maps to provide, as part of its pension guidance function, a pensions dashboard service to deal with the information from both occupational and personal pension schemes, as well as state pension information.
Another would require pension schemes to “take account of international climate change treaties to which the UK is a signatory”.
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