UK - The Department or Work and Pensions (DWP) has published the final regulations relating to the calculation of cash equivalent transfer values (CETVs).

The new regulations - which come into force on October 1 2008 - will require schemes to calculate transfer values on a scheme-specific approach, based on the anticipated cost to the scheme if a member stayed in the scheme rather than calculating as though they were transferring out.

In a response to the consultation on the draft regulations - which closed on August 17 2007 - the government dismissed concerns about the use of a scheme-specific approach, which some respondents had claimed would be unfair to members as trustees could select "inappropriate assumptions".

Instead, the government claimed the scheme-specific approach was the best method as it was "consistent with existing arrangements" and would not affect the ongoing viability of the scheme.

Following feedback from the consultation process, the government also concluded there was no need to include a prescribed role for the employer when paying CETVs above the minimum amount.

Concerns were raised suggesting trustees could make decisions which "could have adverse cost implications for employers", however the government said there had been "no good arguments" to suggest why trustees should "act in a disproportionate manner" under the new regulations "when they do not appear to have done so under the existing arrangements".

That said, the government noted the new regulations state trustees must "have regard to any requirement for consent" when determining member transfer values.

In addition, the government concluded potential problems arising from the transfer of a member of a European pensions institution to a UK scheme - in particular in relation to the definition of an actuary - are "not a significant issue at present" although it admitted it would "consider the matter further".

A spokesperson for the DWP said: "When the government originally consulted on various approaches to the calculation of pensions transfer values, the great majority of respondents favoured a scheme specific approach. That is what these regulations deliver."

However the response to the consultation acknowledged the need for more guidance on various issues surrounding transfer values, and, as a result, it confirmed The Pensions Regulator (TPR) would be issuing a guidance note for trustees.

TPR claimed the "practical guidance" would be available before the regulations come into force in October, and suggested the note would "help trustees understand the different considerations and new requirements in relation to transfers".

In addition, TPR confirmed it also intends to publish guidance on this issue for scheme members which it claimed would help them "compare the key risks with any potential advantages associated with taking a transfer to another pension vehicle".

The new regulations will be in place for at least three years, as the government has confirmed the next review and evaluation of the policy will not take place until October 2011.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com.

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