Pensions consultancy Towers Watson has warned that the April pension freedoms proposals may mean that employers will find it harder to change defined contribution pension providers.
The changes could also make it more difficult for companies to consolidate pension schemes following mergers and acquisitions.
Towers Watson is concerned that the changes would result in pensions being fragmented after corporate transactions and when employers switch providers.
Either could considerably increase costs and risk for employers.
The European Parliament’s Economic and Monetary Affairs Committee rapporteur, Brian Hayes, has proposed that bulk transfers between schemes in the same member state should be approved by the majority of members or their representatives.
This goes further than the European Commission’s previous proposal that this would only apply to bulk transfers across borders.
Tower’s Watson’s LifeSight DC master trust managing director Fiona Matthews told Professional Pensions magazine that Hayes’ proposal would cause two problems for employers:
“First, it would be a stumbling block where employers with trust-based defined contribution schemes decide to outsource pension provision rather than keeping their own scheme going.
“‘Pension freedom’ has changed what schemes should be doing as a matter of good practice—for example, giving members more choice means they will need more help to decide what to do. Some employers will want their schemes to rise to this challenge but others will prefer to move members’ savings across to a multi-employer vehicle with the expertise to do this.
“Second, preventing non-consensual bulk transfers would make it much harder for employers to tidy up pension arrangements following mergers or acquisitions. UK law already provides protections for members around such transfers.”