LONDON – Hewitt Associates, a global human resources consulting and outsourcing company, has responded to the consultation on 'guidance on transfer incentives' issued by the Pensions Regulator.

Alan Howard, pension consultant at Hewitt Associates said:

"We welcome the Regulator's guidance on the key principles that underpin a well run enhanced transfer value exercise. We support the Regulator in its views on the need to provide impartial independent financial advice, the importance of involving the trustees in the process, and ensuring all communications are open, honest and transparent. This is very much in keeping with the approach Hewitt takes when advising companies and trustees on these exercises.

"However, we are disappointed by the "presumption of guilt" that permeates the statement, implying that these exercises should be approached with the view that they are not in the members' interests. In particular, we do not agree with the Regulator that only a minority of members are likely to benefit from accepting a transfer incentive. We also feel that the comments on the possible legal action that could be faced by employers and trustees who engage in these exercises may unnecessarily discourage companies from carrying them out - even when they completely comply with the letter and spirit of the guidance. As long as the member has access to the full facts, and suitable technical support, it should not be presumed that a member is incapable of taking an informed decision about his future benefits."

Alan Howard continued:

"It's also disappointing that the Regulator seems to have failed to consider in any detail the possibility that defined benefit (DB) pension schemes may not pay out the full  benefits promised to members, or any of the uncertainty that exists around schemes. Many deferred members of pension schemes may lose some of the value of their retirement benefits as a result of the government's proposal to change the inflation index used to increase pensions from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI). The government's announcement was a timely reminder that DB pensions do not provide cast-iron guarantees of a certain benefit in retirement. Many members may prefer the flexibility of their own pension pot - which an enhanced transfer value exercise can provide for them.

Alan Howard continued:

"Although titled guidance on transfer incentives, the regulator also makes it clear that the guidance should apply to pension increase conversion exercises. The guidance surrounding independent financial advice could be particularly onerous for these, as it is not clear who would provide the suggested advice.

"However, we continue to believe that successful exercises can lead to win-win situations for employers and members. Employers can reduce the risks posed by their schemes and the volatility on their balance sheets, while members can have the opportunity to boost their income in retirement and gain additional flexibility. When it's the appropriate approach, we look forward to working with companies and trustees to implement these liability management solutions."

About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organisations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visitwww.hewitt.com.