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FSA warning on pension proposals

Money protected by an umbrella29/02/12

By Scott Allan

Workers who are being urged to transfer their pension into a personal scheme by their employer will need to be offered better incentives to do so, under proposals put forward by the Financial Services Authority (FSA).

The FSA warns that companies trying to reduce liabilities by offering members of defined benefit schemes a move into personal pensions must put forward "fair deals".

Describing the issue as "complex", the FSA report said that an under-valuation of benefits of up to £20 billion would be avoided by the reform it is proposing.

People who are due to retire have the option of converting their personal pension fund into an annuity or take money from the fund, known as income drawdown, to provide regular payments.

The pensions system in the UK is set to undergo a huge overhaul from October, starting with the phasing-in of automatic enrolment into schemes, with larger companies being targeted first.

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