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Members of defined benefit pension schemes may be concerned when major events happen at the employer (or look like they are going to happen) in case there is an impact on their benefits.

Major events include when the employer supporting the scheme is in financial distress or is restructuring as part of an insolvency. They may also include events where the employer is not necessarily in financial difficulty but which could nevertheless have an impact on the scheme and raise member concerns, such as:

Employer events can lead to members asking to transfer their benefits, which may not be in their best interests, and can increase their risk to scams.

As a trustee, you can manage member uncertainty around certain events by communicating effectively with scheme members.

In respect of each major event, we expect you to explain to members the impact on their pension benefits (if any), the employer’s ability to support the scheme and what action you’re taking to manage the situation.

Additionally, to address the possibility that deferred members may seek to request a transfer of their benefits from the scheme as a result of the event, we would expect trustees to include in communications to such members an explanation of the risks associated with taking a cash equivalent transfer value (CETV), and the requirement to take independent financial advice in most cases.

If possible (and if it’s appropriate) you should communicate with members before or at the start of the event in question so any member concerns can be addressed in a timely manner. You will need to consider factors such as the likelihood of the event occurring and the level of commercial sensitivity. If the employer is going through insolvency, we expect you to explain whether the scheme could enter the Pension Protection Fund and what this could mean for their benefits.

At the same time, you will need to take steps to understand and manage any impact of the event on the scheme in line with any contingency plan you have in place.

2. Decide how to respond to a possible event