Over the last few years there has been a growing trend of employers attempting to persuade their employees to give up their pension rights in exchange for short term financial gain.
Many firms do not want to pay into their employees’ pension schemes so use the offer of cash incentives to encourage them to move their pensions to someone else.
Of course in the long run, this results in the employer saving money as the cash incentives are not as much as the ongoing cost of paying into their employees’ pensions.
Are employees being tricked?
It may not seem like too much of a problem. After all the employee should be old and wise enough to realise what they are signing up for when they agree to such deals.
However, a lot of employer’s methods of initiating such deals would appear to be rather underhand and Pensions Minister, Steve Webb is hoping to put an end to the practice.
He feels that often employees are being tricked into giving up their pension rights and claims it is not uncommon for firms to offer these deals to their employees just before Christmas, knowing full well this is when they might be most vulnerable financially.
Speaking to the BBC before a meeting of pension representatives, Mr Webb Said:
“People do not understand what they are doing and in many cases are making the wrong choice. If people are giving up good pension rights, at a price that isn’t ultimately fair to them, that is not acceptable.”
CBI Director disagrees
However, not everybody shares Mr Webb’s views. Unsurprisingly, CBI Director for employment policy, Neil Carberry sided with the employers saying they risk being unfairly demonised.
He said “The deal many policy holders get from good Enhanced Transfer Value offers is often attractive. And we should not blame companies for managing their liabilities to ensure both a fair deal for pension scheme members and the growth we all want to see.”