Briefing Sheet for Employers
Social Housing Pension Scheme (SHPS)
SHPS Pensions Committee (the Committee); Policy on Inducement Offers
1. Background
1.1. A new practice has recently emerged whereby some employers have offered financial inducements to members to transfer their benefits out of a defined benefit pension scheme, or to accept reductions in benefits (for example, to give up non-statutory increases to pensions in payment, or to accept lower increases).Within a scheme like SHPS an employer might consider offering inducements in order to reduce their liabilities and therefore the debt for which they would potentially be liable on leaving the scheme.
1.2. The Pensions Regulator has issued guidance on inducement offers.The document can be accessed at: http://www.thepensionsregulator.gov.uk/pdf/inducements.pdf
1.3. This paper sets out the Committee’s policy and practice on inducement offers
2. SHPS Pensions Committee Policy
2.1. The Pensions Trust will report inducement exercises to the Committee.
2.2. The Committee is unable to comply with a request to modify members’ rights to pension increases.To do so would infringe the provisions of the Trust Deed and the Committee’s fiduciary duty to act in the best financial interests of scheme members.
2.3. Due to Data Protection Act considerations, the Committee cannot disclose members’ personal details without a signed authorisation. Where employers wish to obtain details of deferred and pensioner members The Pensions Trust will, upon request, contact known deferred and pensioner members to establish if they consent to having their details passed on.
2.4. Where transfer inducements are proposed, the Committee requires full details of the inducement offer.
2.5. The Committee urges employers to comply in full with the Regulator’s guidance on communication with members and to provide independent financial advice to affected members.
2.6. The Committee will normally issue its own communication to affected members setting out the implications of transferring out of the scheme.
2.7. Inducement exercises will place a strain on scheme administration and management capacity. The Committee will recover from the employer the costs of any work involved, including costs incurred in contacting deferred and pensioner members and any professional advice it requires in this respect. All such costs are payable by the employer in advance.
2.8. Enhancements to transfer values must be lodged with the Trustee in time for the funds to clear before the enhanced transfer values can be paid out.