Raft of emergency measures unveiled to protect pensions

The Pensions Regulator has temporarily suspended the right of members to cash in their defined benefit pension pots.

The Pensions Regulator has temporarily suspended the right of members to cash in their defined benefit pension pots.

In normal times, members of defined benefit pension schemes are been able to cash in their pot.

This, however, has now been suspended for three months in order to give pension trustees more time to calculate pension transfer values following the steep market falls.

The three-month delay will also prevent individuals, those who wished to cash in their pot, being targeted by scammers.   

The move is part of a raft of emergency measures introduced by the government in order to protect pension schemes in the current economic climate.

Former pensions minister Ros Altmann notes: “There have been concerns that people transferring money out of their defined benefit pension schemes at the moment could be damaging either the scheme’s or their own future.

“This sensible and pragmatic decision will help to protect scheme members who are at heightened risk of scammers while more people are at home or not working, and while the markets are in turmoil.”

The regulator has also announced that companies can halt payments to plug deficits in their schemes, known as ‘deficit repair contributions’ for three months.

The decision is intended to allow relief for businesses with cashflow problems due to the coronavirus lockdown. The suspension of payments must be made with the agreement with the trustee of their pension scheme.

Altmann notes: “This is another pragmatic decision, allowing some breathing space for employers to deal with their business finances.

“It is clear that the suspension of deficit contributions must also be accompanied by other measures from the employer, including not paying dividends to shareholders. It would be unacceptable for firms to pay money to shareholders while withholding it from the pension scheme.”

The regulator has also put the 10% pension scheme levy increase on hold, which was due to come into effect on 1 April. This is paid by occupational and personal pension schemes to cover the cost of running The Pensions Regulator, the Pensions Ombudsman Service and the Pensions Advisory Service. The planned hike in the levy marked the first in over a decade.

Altmann adds: “This package of emergency measures is designed to help pension schemes survive through the crisis, while also helping to protect members’ pensions for the longer term and offset the increased scam risks.

“Some employers and schemes will inevitably fail and we do not yet know how long this situation will last, but it is good to see pensions have not been overlooked in the ongoing turmoil."

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