New regulations giving trustees and scheme managers the right to stop or delay suspicious pension transfers will come into force this month. Regulators and industry welcome the changes, but are further initiatives needed to address the problem? 

 

The regulations come into force on 30 November and limit members’ statutory right to transfer. They give trustees and scheme managers the right to raise ‘red flags’ where they suspect a scam and prevent the transfer completely or an ‘amber flag’ to pause a transfer until a scheme member can show they have taken scams guidance from the Money and Pensions Service.  

 

 

The Department for Work and Pensions said the new measures will provide better protection from fraudsters who frequently offer 'too good to be true' incentives, such as free pension reviews, early access to pension cash, or other time-limited offers, luring victims into moving their savings into a scam scheme.

 

Minister for pensions Guy Opperman said: “We are tackling the scourge of pension scams in practical terms to safeguard pensioners’ hard-earned savings.” 

The government has said it will review the new regulations within 18 months to ensure they remain as effective as possible in targeting the evolving methods used by scammers. 

The rules became part of the Pension Schemes Act 2021 after Work and Pensions Committee chair Stephen Timms proposed an amendment, following lobbying by the Pension Scams Industry Group.

 

The committee chaired by Timms called for further wide-ranging measures to improve scams prevention in March, such as including financial harm in the online safety bill and putting the multi-agency Project Bloom on a statutory footing among other things. The government has responded by promising to publish a new Fraud Action Plan, review the effectiveness of the flags rules, consult about online advertising and consider making Project Bloom a formal central intelligence agency. 

 

 

Pensions ombudsman Anthony Arter welcomed the stricter regulations about transfers. “Having witnessed the real damage that pension scams can inflict on an individual’s retirement, I welcome the new transfer regulations which look to make transfers safer. I am optimistic that over time, statutory clarity regarding the level of due diligence expected of trustees and additional information and guidance to be given where appropriate to those planning to transfer will help combat pension scams, and also reduce the number of transfer complaints to The Pensions Ombudsman,” said Arter. 

 

He said complaints received after the regulations come into effect will be investigated within the framework of those regulations and industry guidance on a case-by-case basis, having regard to the facts and evidence in each case. 

 

At the same time as the new regulations were published on Monday, the Pensions Regulator released new guidance to help trustees understand their new powers to halt suspicious transfers.  

 

TPR noted that most pension transfers are legitimate and can proceed with minimum intervention, but that by PSIG’s estimates, 5% of all transfer requests give trustees and scheme managers cause for concern. 

 

Nicola Parish, TPR's executive director of frontline regulation, welcomed the new regulations. “We are pleased these new rules enshrine in legislation two of the key parts of the pledge to combat pension scams – around due diligence measures and issuing members warnings of high-risk transfers,” she said, urging all trustees and pension providers to take note of the rules and report suspected scams to Action Fraud, or by calling 101 in Scotland. 

 

Margaret Snowdon, who chairs PSIG, which worked with TPR and the DWP to deliver the changes, has urged the industry to apply the new rules. “Schemes that already carry out due diligence checks and maintain clean lists of transfers destinations should be well prepared for the new rules and the majority of transfers should proceed without delay – the purpose of the changes is to allow trustees to say no when faced with scam signs,” she said. PSIG is working on version three of its Scams Code, which will be available in a few weeks’ time. 

 

However, for Snowdon this is not “job done” - she said some issues raised by PSIG and by the Work and Pensions Committee need to be addressed as quickly as possible. Among them are online financial adverts, but she said there was much resistance to including financial ads in the online safety bill. 

 

Snowdon said she has been speaking to search engine giant Google on how the firm can help. “I am pleased that they have acknowledged the issue and have introduced a process to ensure financial ads can only be placed by [Financial Conduct Authority]-regulated firms. This is great, but more needs to be done,” she said. "We need to be able to rely on FCA regulation of firms or the control of adverts will be a waste of time,” she warned, suggesting that such regulation needs to improve. 

 

She would like to see Project Bloom being “refocused” and to be clear about outcomes. “It would be good to get a ringfenced budged for Bloom, but I am doubtful that will happen,” she noted. 

 

A “single straightforward point for reporting of scams” is also needed to address the problem, she said, calling the current approach “scattergun” and “confusing”.  

 

 

The Investing and Saving Alliance, which represents firms involved in the supply and distribution of savings, investment products and associated services, also said the rules were a positive development. Head of retirement Renny Biggins said although the rules cannot completely stop scams from occurring through the transfer process, it will see their numbers decline and general consumer awareness heightened.  

 

“It is important to note that the process does allow for scheme discretion. Where previous due diligence has already identified a receiving scheme as being safe, there is no requirement placed on the ceding scheme to complete additional steps before proceeding to make the transfer. The additional steps in the process should only be triggered where an element of uncertainty relating to the receiving scheme exists,” he said, adding that if the revised transfer journey works as intended in an operational environment, the new regulations should not create additional delays for most transfers. 

Kirsty Pake, a senior associate at law firm Sackers, said while in some circumstances, trustees will be able to refuse to make a statutory transfer, "it is expected that most transfers will continue to be made with minimal intervention".

She added that trustees and administrators will need to act quickly to review and update their transfer processes and member communications before the new requirements come into force at the end of this month.

 

 

 
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