From 6 April 2015 the Pension Schemes Act 2015 has placed a restriction on transfers-out of the Teachers Pension Scheme
The Pension Schemes Act 2015 has put a restriction on transfers-out from unfunded Defined Benefit (DB) public service pension schemes to schemes from which benefits can be accessed flexibly. The change, which came into force on the 6th of April, means members will no longer be able to transfer-out benefits to such schemes, unless the member has not completed the qualification period for pension benefits but has more than 3 months service (this does not apply where all service is before the 1st of January 1986).
To process applications before the deadline, a completed Discharge Form 350 was required by 5th April 2015. To enable an increased number of transfer-out applications to be processed in the run up to the deadline Teachers’ Pensions:
- Increased the capacity of their transfers administration team
- Placed a time-limited suspension on transfers to DB schemes in order to focus resources on applications for transfers to Defined Contribution (DC) schemes
- Relaxed their policy to verify date of birth using notified copies instead of original documents
- Allowed faxed copies of Discharge Form 350 rather than the original (provided the original is received by the 30th of April 2015)
Teachers Pensions also ensured members were notified of the upcoming deadline by including a statement on the legislative changes on letters acknowledging receipt of applications, and by writing to members (or their nominated representatives) to advise when it was not possible to immediately provide a guaranteed statement of entitlement (GTV). They also followed up all non-responses to third-party information requests and worked with HMRC to avoid delays in obtaining information on Guaranteed Minimum Pension liability (required for the GTV calculation).
When deciding to restrict transfers from unfunded public service pension schemes, the Government considered both the interests of members and of taxpayers. If the Government had continued to allow such transfers after the introduction of new pension flexibilities, they could have been exposed to upfront direct costs leading to higher taxes or greater debt. This led the Government to decide that the balance of interests favoured restricting transfers.
It is important to note that public service pensions still represent good value, both to their members and to the taxpayer. These changes do not affect members who choose to work or retire abroad, who will still be able to access their pensions and will continue to have their benefits increased in line with prices.