Andrew Williams Posted July 21, 2014 Report Share Posted July 21, 2014 The UK Government have today released their response to the consultation regards the Budget announcements relating to changes to the UK Pension system and in particular the discussion around a ban on Pension Transfers for Defined Benefit Schemes. Below is an overview of this response. Defined benefit schemes the government will continue to allow transfers from private sector defined benefit to defined contribution schemes (excluding pensions that are already in payment); the government will introduce two new safeguards to protect individuals and pension schemes: a new requirement for an individual to take advice from a professional financial adviser, who is independent from the defined benefit scheme and authorised by the FCA, before a transfer can be accepted; and new guidance for trustees on the use of their existing powers to delay transfer payments and take account of scheme funding levels when deciding on transfer values; the government intends to consult on removing the requirement to transfer first to defined contribution schemes for those defined benefit members who wish to access their savings flexibly; the government continues to believe that transfers from unfunded public service defined benefit schemes should be banned. Transfers from funded defined benefit to defined contribution schemes will be permitted and safeguards similar to those in the private sector will be introduced where appropriate Public service schemes For public service schemes, the majority of which are unfunded, the contributions of members and employers are used to pay for pensions in payment, with any surplus requirements met by taxpayers through payments from the Exchequer. As there are no ‘funds’ for these pension schemes, any decisions to transfer would represent an upfront direct cost to the Exchequer. Given this cost, the government said at Budget that it would remove the option for those in unfunded public service pension schemes to transfer to a defined contribution scheme except in very limited circumstances, and intends to legislate to this effect in this Parliament. The government’s intention was to treat all schemes equally; however the consultation document recognised that were there to be a different approach adopted for private sector schemes, the government would consider how best to treat the funded public service schemes. Treatment of funded public service schemes The costs to the Exchequer of withdrawals from funded public service pension schemes are less direct than from unfunded schemes, given the assets held by funded schemes. However, in some circumstances, for example where a significant number of withdrawals from a fund impact the short-term cash-flow and therefore stability of the fund, there could still be implications for scheme members and the taxpayer. The equivalent concern over scheme stability also arises for private sector defined benefit schemes and is addressed by existing powers allowing trustees to ask the Regulator for longer to make transfer payments (if the interests of the members of the scheme generally will be prejudiced by making the payment within the usual period), and to reduce transfer values to reflect scheme funding, measures which could equally apply to public service pension schemes. Since funded public service pension schemes hold assets, transfers out have a less direct impact on the Exchequer. As such, and in light of the decision to continue to allow transfers from private sector defined benefit to defined contribution schemes the government has decided to continue to allow transfers from funded public sector defined benefit schemes. Safeguards akin to those in the private sector will be introduced in the public service schemes where they do not already exist. This will include the Local Government Pension Scheme (LGPS), which is the largest of the funded public service pension schemes. Unlike the other funded public service pension schemes, the LGPS is not a trust-based scheme. The government will therefore work with the Department for Communities and Local Government and other stakeholders over the summer to ensure appropriate safeguards are introduced to the Scheme which give due consideration to the interests of both scheme members and the taxpayer. Summary Private Sector Defined Benefit Pensions continue to be able to be transferred; Public Sector Funded Defined Benefit Pensions continue to be able to be transferred; Public Sector Unfunded Defined Benefit Pensions can no longer be transferred (except in very limited circumstances) Unfortunately there still seems to be no explanation yet of the 'except in very limited circumstances' definition. Kind regards Andy Quote Link to comment Share on other sites More sharing options...
steven_gers Posted July 22, 2014 Report Share Posted July 22, 2014 So as I work in the private sector with British Gas my pension would still be able to be transferred to Oz? My intention was to leave my pension here until at least a year so I know we have settled in Oz. Steven Quote Link to comment Share on other sites More sharing options...
Andrew Williams Posted July 22, 2014 Author Report Share Posted July 22, 2014 Hi Steven Yes the outcome states that private sector pension transfers can continue. Good call on waiting until you are settled, there is generally no rush to have to transfer so when you feel that it is your intention to remain then investigate further. KR Andy Quote Link to comment Share on other sites More sharing options...
danmon Posted July 22, 2014 Report Share Posted July 22, 2014 Would a Police pension fall under the banner of an unfunded scheme ? I've got 13.5 years to transfer but didn't want to do it yet as I was on a 457 visa. I will have PR very shortly and was hoping at some stage to transfer my pension over here. This might have scuppered my plans. Quote Link to comment Share on other sites More sharing options...
Andrew Williams Posted July 23, 2014 Author Report Share Posted July 23, 2014 Hi danmon I understand it to be Unfunded (http://www.bbc.com/news/business-114468300)....... absolutely a good idea to wait until you have been accepted for/guaranteed permanent residence before looking to transfer as there could be severe implications if the pension was transferred and then you did not secure perm thus having to return. I still cannot find details of what is classed as 'very limited circumstances' in which transfers from Unfunded Schemes can still occur. My belief is that a person living/moving overseas will fall in this definition although I cannot be certain. If you firmly believe you will gain permanent residence before next year it may be worth while investigating in the short term. KR Andy Quote Link to comment Share on other sites More sharing options...
eddking2003 Posted September 7, 2014 Report Share Posted September 7, 2014 Hi Andy, Sounds like I am in a fairly similar situation to Danmon, 10 years Military pension but trying to hold off transfer as I am on 457 visa (Just about to lodge PR). It sounds like mine would be an unfunded scheme and therefore the idea of a sooner transfer may be the right choice? We are staying here in Australia for the foreseeable future. Quote Link to comment Share on other sites More sharing options...
Andrew Williams Posted September 9, 2014 Author Report Share Posted September 9, 2014 (edited) Hi Andy, Sounds like I am in a fairly similar situation to Danmon, 10 years Military pension but trying to hold off transfer as I am on 457 visa (Just about to lodge PR). It sounds like mine would be an unfunded scheme and therefore the idea of a sooner transfer may be the right choice? We are staying here in Australia for the foreseeable future. Hello Yes you are right in thinking it would be un-funded. Two issues I see here, firstly is a transfer to Oz right for you and therefore advice would be required taking into account your personal position and future goals and objectives. It may well be leaving it where it is in the UK is appropriate for you. If a transfer does seem to be the right move the second issue is your residence. If you could guarantee you would obtain permanent residence then perhaps a move to Oz prior to obtaining this might be appropriate however this is a big risk as if you did not secure perm then due to technical legislation you could end up losing between 40% - 55% of your pot to UK penalty breaches. The other potential option could be a move to a UK defined contribution scheme in the UK so as to release the pension prior to the potential UK ban which then gives the option of transferring after April 2015 once/if you obtain permanent residence. The risk here is again if perm is not obtained however a different risk this time in that you have moved from a UK final salary scheme (DB) to a UK market linked scheme (DC) which could then be a long term financial mistake since the Military scheme is an income for life and the DC would carry the investment risk (similar to Oz but without the additional potential benefits Oz may offer), although that said I am finding the transfer values from government pensions currently to be very generous. So quite complex and potentially a difficult decision to have to make, I think that the way the UK government have handled this is atrocious to be honest as it has many people in a panic and a lot of people in my opinion transferring for the wrong reasons or on the back of certain companies using scaremongering tactics and making a transfer to Oz seem a no brainer, I think there are many people transferring without having a full understanding of what they are giving up. Kind regards Andy Edited September 9, 2014 by Andrew Williams Quote Link to comment Share on other sites More sharing options...
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