Concerns over pensions commuting advice

Pension scheme members may be exchanging their pension for a cash sum without fully understanding the consequences, an industry body has claimed.



The Actuarial Profession said that when pension scheme members retire they are usually offered the chance to surrender some of their pension for a cash lump sum, known as 'commuting' pensions for cash.

However, the organisation said that it was concerned that some members were exchanging their pension for cash without having a clear idea of the benefits they were giving up.

Chairman of the profession's pensions board Gordon Sharp said: "We know that typical cash commutation terms can result in a cash sum that is much less than the cost of replacing the pension surrendered.

"Pension scheme benefits have become very valuable because people are living longer and pension schemes enjoy greater legal protection. We need to make sure people are getting the appropriate advice to help them make these important decisions at a key point in their lives."

The Actuarial Profession has written to the Pensions Regulator and the Department for Work and Pensions urging that action is taken to make sure pension scheme members are provided with appropriate information, with proposals including a requirement for a risk warning.

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