Trustees will be allowed to deny pension transfer requests under DWP anti-scam rules published today.
The new regulations will prevent people’s savings from being transferred to suspect schemes without expert guidance in the case of other potentially fraudulent transfers. The measures will also allow trustees or scheme managers to determine whether any specified circumstances that would preclude a transfer exist.
Most transfers go through with no issue, and the government wants this to continue after the new regulations take effect on November 30, 2021. These measures follow the government’s previous ban on pension cold calling and more rigid rules to prevent scammers from opening fraudulent pension schemes.
The government says it is fully committed to collaborating with regulators, industry, and law enforcement to protect people from pension scams involving transfers from one pension scheme to another.
Parliamentary under-secretary of State for pensions and financial inclusion Guy Opperman says: “I have listened to industry about the important part trustees play in preventing scams and believe the conditions on transfers set out in the draft regulations attached to this consultation put them in the driving seat when it comes to pension transfers.
“My officials and I have had extensive discussions with industry and the regulators in setting the level and detail of our ambition. We know there is a tremendous amount of good work already going on and want to build on that. I expect trustees to continue to undertake due diligence, however; I want that process to be supported by the clear conditions set out in these regulations.”
Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey says: “Scammers rob people of their hard-earned retirement savings and for too long schemes have been powerless to stop them. These measures are a welcome step forward in protecting scheme members by giving schemes the power to stop transfers or refer members for guidance if they have any suspicions.
“Pension schemes should prepare for the changes by reviewing their due diligence processes. Many providers and schemes will already operate a list of schemes they are happy to transfer to and it is worth revisiting this to make sure it is robust. Member questionnaires should also be reviewed to make sure the questions deliver the information needed to make an informed decision.”
Hargreaves Lansdown head of regulatory advice and policy Phil Warner says: “The DWP have consulted widely to produce regulations which are a powerful tool. They provide a legislative solution to the legislative problem of pension schemes being forced to transfer despite having identified a pension scam risk. Except in the clearest of cases, the member can still choose to proceed once the member has received MaPS guidance on how to identify a scam.
“These regulations do not change current obligations on pension schemes to undertake appropriate due diligence before transferring. The difference is that pension schemes can now more effectively act on the results of this due diligence. Importantly, pension schemes which currently make discretionary transfers to low pension scam risk destinations can still do so, ensuring that legitimate non-statutory transfers are not blocked or delayed due to excessive due diligence.”
Canada Life technical director Andrew Tully says: “Measures to protect individuals from pension scams are welcome. It is well documented how many people are affected by scams and there are many sad personal stories behind the large monetary amounts involved. However, there are relatively few scams around transfers before age 55, as most people know there are only very limited circumstances where you can access your money legally before age 55. Instead, scammers largely wait until people can legally access their money from age 55 onwards and these measures do nothing to prevent those scams.
“While more safeguards are helpful, people want, and expect, pension schemes and providers to move money to a new provider quickly and safely. We need to make sure the vast majority of transfers which are being legitimately transferred by the member are not unduly delayed by these new measures.”
Broadstone technical director David Brooks says: “The rules are not perfect as they will require more work for bona fide transfers going to many providers whether they’re regulated by FCA and PRA or not with a minimal safe list including Master Trusts, public sector schemes and CDC schemes only. All other transfers will fall into condition 2 which is an aggregation of all the other conditions previously proposed but with a clearer emphasis that if a transfer looks suspicious the trustees can stop the transfer.
“Trustees will need to ensure that processes are up to date. We know a key focus for the Pensions Ombudsman will be ensuring schemes issue updated and compliant communications. Trustees should also be ready for more work and cost – more cases that don’t fit the conditions requiring additional risk warnings to be issued will result in increased levels of involvement from them.”