I read with interest the comments made by TPR Chairman David Norgrove about the use of transfer incentive exercises, Mr Norgrove suggests that trustees should become heavily involved in policing such exercises. He also suggests that trustees’ default position should be to treat exercises with scepticism and asserts that they are unlikely ever to be in the members’ interests. Yet only a week earlier, as reported in our blog, Fraser Sparkes from leading legal firm Hammonds was suggesting that trustees should not become involved with ETV exercises as it goes beyond their trustee responsibilities. As if being a trustee wasn't complicated enough!! Mr Norgrove also described a number of “worrying tactics” including the offer of advice paid for by the employer, on the condition members take that advice, excessive pressure to make a decision and the provision of misinformation. Whilst clearly I would not condone any of these tactics it would be interesting to know just how widespread these abuses are or if a few isolated incidents are colouring the Regulator’s view as a whole. The provision of independent financial advice on pension transfers is one of the, if not the, most heavily regulated areas of financial advice and it's hard to believe that such practices are widespread where IFAs are involved in the process. If the abuses alluded to by Mr Norgrove are indeed widespread, then surely it represents a very significant breakdown of the regulatory process and the FSA need to be provided with names of the parties involved to allow them to investigate thoroughly and take appropriate action. In my experience highly reputable firms of IFA's with highly qualified advisers who offer to provide transfer advisory services do so based upon the facts and figures presented to them and take a very cautious approach to any positive recommendation to transfer. All parties work within the guidance issued by the Pension Regulator in January 2007. In our view there is no benefit to a company in doing anything other than ensuring that members can be clearly demonstrated to have made an informed decision as regards their pension options in this scenario. To do otherwise is to leave open the possibility of a member claiming that he did not understand the decision he was making, or worse, was actively misled, and a court or tribunal directing that the liability has therefore not been properly discharged, with the Employer held to be still liable for the “transferred” pension benefits. As noted above Mr Norgrove also states that “In general it is unlikely to be in members’ interest to transfer out of a DB Scheme.” However, that is not to say that it is never in a member's interest and clearly depends on the level of transfer value offered in exchange for the benefits given up in the final salary scheme. It will also depend on a wide range of softer issues directly linked to a member’s personal circumstances e.g. health, attitude to risk, etc. I think it is very dangerous for trustees, and indeed Mr Norgrove, to make an assumption about what is in a particular member’s interests without having fully investigated an individual’s personal circumstances and objectives. Certainly any IFA adopting such an approach would be leaving himself open, quite rightly, to disciplinary action by the FSA. Each individual will have a choice to make based upon the figures and their personal circumstances and ideally with the benefit of independent financial advice paid for by the employer. In this area there must be no additional incentive for advisers to encourage transfer, such as by the payment of a commission, but be based upon a fee payable regardless of the recommendation given. Only if the offer represents true value for money is it likely to be recommended by the adviser and accepted by the member. Anything else just leaves the adviser open to a future claim and to pursuit by their regulatory body. It is also interesting that by their very nature these exercises will be time pressured as any transfer offered will only be guaranteed for a limited time and as top-ups could swing wildly companies will need limit the extent of their commitment within this timescale. Frequently members are unaware of this and if pointed out could look like undue pressure is being exerted. When attractive top-ups are made available along with high quality financial advice, ETV exercises represent a legitimate risk reduction tool for scheme sponsors and ultimately an attractive alternative for individuals who have a right to chose what is right for them rather than having someone take that decision on their behalf. Finally, Parliament has seen fit to make the FSA responsible for the regulation of the provision of financial advice, including advice on pension transfers. Given this, and noting the legal view mentioned above about the limits of trustee responsibility, I would question whether trustees should have a role in regulating financial advice thrust upon them as suggested by Mr Norgrove. Trustees should take their own legal advice about their responsibilities in this area and the potential consequences of any actions or inactions on their part.