18 February 2003

This information is provided courtesy of Law-Now, CMS Cameron McKenna's free on-line information service.

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OPRA announces transfer value relaxation

OPRA has today announced that it is relaxing the requirement
for trustees to issue statements of guaranteed cash
equivalent transfer values (CETVs). The press release
follows the publication of draft regulations (the
Occupational Pension Schemes (Transfer Values) (Amendment)
Regulations 2003) which aim to give trustees more
flexibility to quote and pay reduced CETVs if their scheme
is underfunded.

The problem currently faced by many trustees is that they
are only permitted to reduce CETVs by reference to the
deficit shown in the scheme's last MFR valuation. The
draft regulations propose that CETVs could also be reduced
if the actuary believes that payment of them would reduce
the security of other members' benefits.

Consultation on the draft regulations ends on 28 March 2003
and this OPRA relaxation is aimed at providing schemes with
flexibility until the regulations come into force. OPRA's
relaxation will allow trustees to suspend the issue of CETV
quotes where the payment of transfer values calculated on
the current basis would prejudice the interests of remaining
members.

Before trustees can take advantage of this they must
obtain actuarial advice and OPRA also expects trustees
to take legal advice and consider any alternative courses
of action such as obtaining additional payments from the
employer. Trustees must inform members of the reason
why they will not be provided with a transfer quote and
must take all necessary steps to resume issuing them as
soon as possible.

This relaxation will not affect transfer quotes that have
already been issued. Accordingly, trustees who want to
take advantage of this need to take advice as soon as
possible and ensure that those issuing transfer quotes on
their behalf are updated on the position.

A full copy of the OPRA guidance can be found at:
www.opra.gov.uk/publications/updates/update1.shtml

The draft Transfer Value Amendment Regulations are at:
www.dwp.gov.uk/consultations/consult/2003/occ-draft-regs/draftamend84con.PDF

For further information on this issue, please contact Mark
Grant at mark.grant@cmck.com or on +44 (0)20 7367 2325.