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Catch up with the latest press releases from LV=

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LV= calls for action to ensure DB To DC Scheme transfers remain an option

Press release: 18/10/2010

  • LV= highlights circumstances when transfers benefit clients

  • And warns about the risks of rushing pension transfer decisions

Following LV=’s official submission to the Department of Work and Pensions’ consultation on the abolition of contracting out on a defined contribution basis, Ray Chinn, LV= head of pensions commented: “We are pleased that the Government has confirmed the abolition date of 6 April 2012 for contracting out on a defined contribution basis, and we support the draft legislation in the main. But we are concerned that a consequence of this legislation would stop most transfers from defined benefit schemes to defined contribution schemes.

“We are currently unsure if this is the Government’s intention, or if further legislation to allow such transfers is being planned. We strongly believe that legislation should be drafted so that transfers from defined benefit schemes to defined contribution schemes would still be permitted on and after 6 April 2012.”

While in many cases it is sensible for people to remain within a defined benefit scheme, there are still a number of circumstances where a transfer is the right thing to do, and the right to such transfers should therefore not be prohibited, for example in the following circumstances:

  • If someone is suffering from ill-health and they will receive a higher income in retirement from an enhanced annuity than would be provided by their current scheme.

  • If their current scheme rules do not match their personal circumstances – for example they are single but the scheme rules requires benefits to be provided for spouse/civil partners in all cases.

  • They wish to go into an unsecured pension to either seek higher returns on their pension investments and / or have greater flexibility over the way in which they structure their retirement.

  • They have concerns about the ongoing viability of their current scheme and want the peace of mind of securing their pension income elsewhere. This is especially true if the pension income they would receive is in excess of the yearly income protected under the Pension Protection Fund.

    Ray Chinn continued: “We have always advocated the importance of people seeking advice if they are considering transferring out of a defined benefit occupation pension scheme, so they can make an informed decision after looking at all the relevant options available to them.

    “Of course, LV= has a vested interest in transfers between schemes being as open as possible, however, our fundamental concerns are driven by the potentially damaging outcome of people either being trapped in a defined benefit scheme that no longer meets their needs, or transferring out in haste before the deadline. This could result in a poor long-term outcome for the individual and risks further damage to the reputation of the pensions industry. Legislation needs to be reviewed wherever it might stop people doing what is best for them.”

About LV=

LV= is a registered trademark of Liverpool Victoria Friendly Society Limited (LVFS) and a trading style of the Liverpool Victoria group of companies.

LV= employs around 4,000 people, serves over 3.8m customers and members, and manages around £9.5bn on their behalf. We are also the UK’s largest friendly society and a leading mutual financial services provider.

LVFS is authorised and regulated by the Financial Services Authority, register number 110035. LVFS is a member of the ABI, the AFM and ILAG. Registered address: County Gates, Bournemouth BH1 2NF.