LCP welcomes the voluntary Code of Good Practice launched this week by an Industry Working Group. This Group, which was set up to seek to ensure that member incentive exercises are undertaken in line with good practice principles, included significant involvement from representatives from LCP and the published principles are broadly in line with our own current internal guidance.
We will be recommending that the voluntary Code of Good Practice is fully adopted for all the future exercises that we advise on. The Code covers enhanced transfer value exercises, total pension increase exchange exercises and pension increase exchange exercises. The key objectives of the Code are to help ensure that members are able to make informed decisions and better choices, whilst permitting these exercises and options to be offered in a responsible manner.
Alex Waite, Partner and Head of Corporate Consulting at LCP, said: "This code is a very helpful step towards harmonising practice in this potentially controversial area. Our approach has always been to help clients communicate options clearly and this code sets a clear benchmark that every future exercise should follow.
"We have advised our clients to avoid cash incentives for some time, as they distort member's decision making. Whilst some companies are concerned that this will drive down member interest in the offer, we have found that a high quality communication programme can ensure that there is a high engagement amongst the members for whom the option is valuable. In a recent exercise, in which no cash was offered, we saw engagement from over half the members. Tailored advice was then provided to each member to ensure they were able to identify the option that most suited their personal circumstances." ?
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