A new code of practice from the Pensions Regulator, on reasonable time periods for early leavers from pension schemes, has been laid before Parliament.
It relates to new provisions expected to come into force in April, outlining the rights of members leaving occupational pension schemes early to receive a cash transfer sum or a refund of their contributions, providing they have between three months and two years pensionable service and do not have vested rights to scheme benefits.
The ‘Early Leavers - reasonable periods’ code of practice relates to new requirements for trustees and managers of pension schemes to notify early leavers of their rights, and to put those rights into effect.
The Pensions Regulator says the code, which is expected to come into effect in May, sets out the reasonable time periods within which the Regulator expects trustees and managers to act, and for early leavers to reply to notification of their rights.
It also explains the duties trustees and pension scheme mangers will have under the new legislation to notify members of their rights, and to carry out their chosen option.
'Reasonable periods' of time for action to be taken, are set out by the Regulator as follows:
- To notify the member of their rights – 3 months from leaving service
- For the member to make their decision and tell the trustees – 3 months from the member being notified of their rights
- To carry out a member’s decision – 3 months from the trustees being notified
- To pay the member cash if they make no decision – 1 month from the end of the period allowed for the member to reply
Early leavers of schemes in wind-up are only entitled to a refund of their contributions, but members who leave a scheme early before its starts to wind-up are still entitled to the option of a cash transfer sum.
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