07 May 2020

Interviewed by Tom Inchley, Susannah Young and Suzanne Padmore provided their thoughts in an article first published on Lexis PSL.

The Pensions Administration Standards Association (PASA) has launched a consultation on its Defined Benefit Transfers Code of Good Practice. Responses to the consultation are required by 30 September and we encourage all industry stakeholders to respond to it.


It is notable that PASA’s coronavirus (COVID-19) guidance for scheme administration (issued, we think, admirably promptly on 30 March 2020) prioritises payment of pensions, investment of contributions, cashflow and member communication and makes only one mention of transfers as ‘second order’ priorities. This must be right, as protection of pensioners in payment and processing retirement and death cases have to be prioritised in the current challenging working environments. However, there is a risk that the underlying reasons for the transfer code of practice (most notably that scammers take advantage of delays in the transfer process) are more prevalent now and will be taken advantage of by pension scammers. It is therefore also quite right that the industry continues, if it possibly can, to focus on establishing a code for the benefit of members on the issues of transfers, as they can ultimately be the most detrimental of events if members make poor decisions.

What is the background to the consultation published by PASA on DB Transfer Code of Good Practice?

In July 2019, PASA issued it Guide to Good Practice on DB Transfers for standard cases, expressly excluding non-standard cases including overseas transfers, non-statutory transfers or transfers where due diligence identified a risk of a pension scam. PASA’s intention then was to issue future Part 2 Guidance in relation to non-standard cases.

It was since agreed that, instead of issuing two separate parts to the guidance, there would be one Code of Good Practice for all DB transfers, and that this would be put to consultation to the industry. The consultation was issued on 20 February 2020 and was due to close on 30 April 2020 but has now been extended to 30 September 2020.

The introduction of freedom and choice in 2015, the significant increase in transfer values in recent years and increased advisor activity has led to a significant increase in the number of transfer quotation requests. Unfortunately, one impact has been a slowing down of the transfer process, which is often preyed upon by scammers to set members’ minds against the transferring scheme, increasing the likelihood of poor decision making. Readers will all have seen the headlines reflecting hundreds of millions lost to pension scams every year.

The intention of the code is to set an industry process that balances the protection of members’ interests with their over-arching statutory right to a transfer and the need to meet their requests in a timely fashion.

What are they key proposals in the draft code and why are they being implemented now? Are there any significant exclusions or exemptions under the proposals? The code is designed to improve the member experience through better communication and greater administrator efficiency. Underpinning the key proposals in the draft code are five principles, as follows:

  • member communications should be fair, clear unbiased and straightforward
  • members and other stakeholders should be kept informed of any delays in processing
  • administrators should work with other stakeholders to encourage adherence to the objectives of the code
  • communications should be designed to reflect best practice, adhering to template documents where possible
  • working practices and processes should be designed to comply with the code including the target timescales listed

How will the objectives be met?

  • Improve the overall member experience through faster, safer transfers. The draft code makes practical suggestions for expected timescales and its promotion of the role of administrators to take a lead on the end-to-end member experience should be welcome. However, it will be interesting to see whether administrators responding to the consultation agree that the proposed timescales are ‘realistic and achievable’, for example 9–11 working days for settlement of transfer values, including the additional due diligence checks in the PSIG Code in combatting pension scams seems challenging. If there is too much pressure on tight timescales there must be a risk that compliance with that code becomes a tick box exercise without the proper consideration the due diligence process requires.
  • Improve efficiency for administrators. There can be no doubt that using standard forms and templates with clear instructions for members and advisors will improve efficiency and the overall time taken to process transfers. Some flexibility must be required though, especially to take into account the type of communication best suited to a particular scheme’s membership.
  • Improve communications and transparency in the processing of transfers. The objective of improving communications and transparency with members must be the trump objective—above speed and efficiency for administrators. Particularly in relation to safeguarding, schemes must remove the opportunity for pension scammers to sow seeds of doubt in members’ minds in relation to the proper management of their benefits by the scheme by full and prompt communications at all times. The key concept that each communication should add value to the member and their advisor is to be applauded.

Are there any significant exclusions or exemptions under the proposals?

Yes—the following transfers are considered out of its scope: bulk transfers including TUPE transfers, bulk member options exercises, schemes in wind up, or following an insolvency type event including schemes in a PPF assessment period, illustrative transfer values, and pension sharing cases.

How would the introduction of the proposals in the draft Code impact on trustees and scheme administrators? Will they be welcomed by scheme members?

The introduction of a code to provide the industry with a framework to help deliver efficient and well communicated practices when processing transfer requests should be generally welcome and is arguably overdue. However, if compliance with a code becomes an industry norm which, at a practical, implementation level is focussed on strict timescales, there is a risk that that will be at the expense of careful consideration of transfer requests, and ultimately might defeat its dual purpose of protecting members at risk of making poor decisions.

From an administrator’s perspective, following agreed standards and processes is likely to improve efficiency, which is also at the heart of the draft code. Scheme members, and sponsors, will also no doubt welcome increased administrator efficiencies. Administrators will though already have many standardised processes which might work well, even if not entirely in line with the proposals in the code. It might be more detrimental for those systems to be changed, rather than the code embracing more flexibility. The code could, for example, focus on process mapping, reporting and accountability rather than strict timescales. The timescales for each scheme will then become reliable and an integral part of the transparent communication with members, but not strictly dictated by the code itself.

This concern is partly reflected in what PASA President, Margaret Snowdon, has said ‘It doesn’t mean everybody has to go out and wholesale change all their processes. We like to think a lot of the processes will fit but some might be aspirational, in which case we ask you to aspire’. With the stakeholders involved in a process which amounts to one of a member’s key lifetime decisions, we see no problem in asking the industry to aspire.

The code is voluntary, meaning that trustees and scheme administrators will not have to make any necessary changes. However, it is important to note while the guidance is voluntary, it can be anticipated that the Pensions Ombudsman will refer to it for a good standard benchmark against which complaint cases will be judged. Compliance with the code would therefore protect trustees and administrators against claims of maladministration.

What is the timetable for implementation of the changes? What are PASA’s next steps?

The consultation was launched in February 2020 and the first response date was 30 April 2020. Despite a pressing need to address transfer risk in the industry, the response to which this code will hopefully form an important part, the consultation deadline has sensibly been extended to 30 September to take account of the ongoing impact of the coronavirus pandemic.

Once the code is released, it is expected that schemes and administrators will seek to comply within 12 months. For this to be an effective code for the industry, we would encourage all administrators, trustees and sponsors to respond to the consultation so that it is workable in practice and reflects the experience of the industry to date on the many questions it sensibly asks.

Key contact


Suzanne Padmore Partner

  • Pensions Disputes
  • Professional Negligence
  • Financial services Disputes and Enforcement 

Subscribe to news and insight

Burges Salmon careers

We work hard to make sure Burges Salmon is a great place to work.
Find out more