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Pensions minister Steve Webb warns business to play fair on pensions

Pensions minister Steve Webb (pictured) says employers must stop “tricking people” into giving up pension rights.

In an interview with the BBC, the Lib Dem MP expressed concern about the use of cash incentives to lure people into moving their pensions elsewhere, or to give up inflation-proofing. He is set to warn the pensions industry and the Pensions Regulator that he could ban these practices.

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."

The incentives include enhancements to transfer values (ETV), or straight cash payments, to those who have left employment but are yet to retire, to move their deferred pensions elsewhere. They can be offers of cash or enhanced pensions, in return for giving up future inflation-proofing.

Webb added: "[This] can look like a good deal when you are offered a cash lump sum, but people forget they will be retired for 20 or 30 years - and compound interest means their pension could fall by a quarter or more if they give up inflation protection.

Commenting on the announcement, Neil Carberry, CBI director for employment policy, said: "The Pensions Regulator would be best bearing down on situations where it is clear that transfer offers are not in a pension-holder's interests, or when either poor or no independent advice has been offered. Regulation of our pensions should be both proportionate and risk-based.

"But we must also be careful not to demonise the whole of this market. The deal many policyholders get from good ETV 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."