UK - The UK government has abandoned plans to prevent defined benefit (DB) pension schemes from transferring their full pensions to defined contribution (DC) schemes.

The Department for Work and Pensions said it changed tack because its policy would have restricted choice for managing pension provision and risked creating an "artificial transfer market".

Consultancy Towers Watson welcomed the move.

Fiona Matthews, senior consultant, said: "Ministers keep saying people responsible enough to have saved for retirement can be trusted to make their own choices about how to take their retirement income.

"Restricting transfer options would have been at odds with that."

She said the very threat of the policy might have been enough to cause an increase in the number of DB to DC transfers over the next year. 

"Many companies looking to reduce their pension liabilities were already thinking about offering former employees incentives to take their benefits elsewhere," she said.

"Faced with what looked like a 'now or never' window, several have accelerated their plans rather than risk missing the boat.

"If a lot of companies gear up to make offers at the same time, some may run into capacity constraints when they come to select independent financial advisers to help members understand their options."

Controversial draft legislation published by the DWP earlier this summer would have put an end to the transfer of many DB pension rights to DC schemes.

"Banning transfers to UK DC schemes while retaining the ability to transfer to overseas DC arrangements would have been odd," Matthews said. "The final policy looks much better."
 

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