The pros and cons of DB to DC transfers

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The ability for DC members to be able to take their pension as a cash lump sum could lead to a raft of requests from DB members to transfer to a DC arrangement. Helen Morrissey looks at the potential impact of such a move and asks how schemes should communicate with members

The Budget brought dramatic change to defined contribution (DC) pensions and has, to a large extent, levelled the playing field between defined benefit (DB) and DC. From next year, DC members will be able to take their entire pension fund as cash subject to tax at their marginal rate. There are concerns this flexibility could lead to widescale requests from DB members to take a cash equivalent transfer value (CETV) to transfer into a DC arrangement. The Chancellor recognised this concern by saying legislation would be introduced to ban CETVs to DC schemes for public sector DB schemes....

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