Many pension transfers are still be held up unnecessarily due to regulatory problems, leading to calls for the Department of Work and Pensions to resolve the issue.
These calls come two and a half years after the introduction of new pension transfer regulations, designed to clamp down on fraud. They also follow what has been described a “lacklustre review of these regulations 12 months ago.
Data from the Money and Pensions Service (MaPS) shows that more than 23,000 of the 28,118 amber flags raised over the past two and a half years were raised due to either an unknown reason or for a potentially low risk transfer relating to overseas investments.
Of the 28,118 MoneyHelper Pension Safeguarding Guidance (PSG) sessions conducted since the introduction of the pension transfer regulations, just under half (46 per cent or 12,888) were conducted with an attendee who did not know the reason why an amber flag had been raised on their pension transfer. Meanwhile, more than a third (36 per cent or 10,153) were conducted after a flag was raised on potentially low-risk transfers relating to overseas investments.
This data was analysed by wealth manager, Quilter following a freedom of information request.
It said that while it is positive that thousands of people have potentially been saved from fraudsters since the regulations were implemented, this has been overshadowed by the large number of pension transfers that have been halted unnecessarily.
Quilter is renewing its call for the DWP to ensure changes are implemented swiftly to improve the pension transfer experience.
Quilter head of retirement policy Jon Greer says:“As the industry has repeatedly highlighted, there remain far too many unnecessary points of friction within the regulations which have greatly limited their effectiveness. Unfortunately, the lack of meaningful change from the DWP has resulted in a growing number of people being negatively impacted as their pension transfers have been stopped in their tracks for what is often no real reason.
“Earlier this year the DWP confirmed that work to consider whether the rules could be improved is ongoing, but it gave no indication of a timeline. Though it is good to hear that the DWP is making efforts to adjust its rules to eliminate the current issues, this arguably should have been done a year ago when it first published its review and could have made changes to prevent further disruption to pension savers.
“As a matter of urgency, the DWP must act to ensure that the divergence between policy intention and the practical application of the law when it comes to the overseas investments wording is ironed out as at present, there is no distinction between overseas investments that present a scam risk as opposed to those that do not.
“Additionally, our understanding of the effectiveness of the rules has been marred by the lack of clarity provided to customers as to why a flag has been raised, and consequently the data that MaPS is able to capture. Pension schemes must be required to provide accurate and clear information to customers and the DWP should consider making it an explicit legislative requirement to swiftly resolve this issue.”
