This ad hoc research paper looks at how employers implement and comply with the current industry voluntary Code of Good Practice for pension incentive exercises.
Pension incentive exercises are one-off invitations or inducements for pension scheme members to make changes to their defined benefit pension scheme.
The research was carried out over the winter of 2013 to 2014. It consisted of 9 case studies of large employers who had recent experience of incentive exercises or were considering starting one.
All the employers who implemented an incentive exercise reported few difficulties as a result of following the code. On balance, they felt the benefits of complying with the code outweigh any challenges and most felt that they would have incurred many of the costs involved with compliance anyway.
About the Code of Practice
The research will feed into the ongoing collection of evidence by the Incentive Exercises Monitoring Board (IEMB), an industry-led group evaluating how employers run incentive exercises. The IEMB is responsible for producing, publicising and monitoring the Code of Good Practice.
The code has been in place since June 2012. It is voluntary but gives employers clear principles to follow when undertaking incentive exercises. If it is found that the code is not working, the government will consider other measures, including legislation, to protect pension scheme members.