Transfer regs: Trustees will be put 'in the driving seat'
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The Department for Work and Pensions is consulting on proposed regulations to give trustees greater power to protect members from scams, including members having to show an employment link between the member and the receiving occupational scheme. Trustees will be able to stop transfers where they have identified 'red flags'.
The consultation, 'Pension scams: empowering trustees and protecting members' proposes to introduce new requirements on trustees and scheme managers, implementing provisions in the Pension Schemes Act 2021.
Pensions minister Guy Opperman said trustees will be "in the driving seat" with the new regulations, adding: "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."
The Pensions Regulator has welcomed the consultation proposals. Nicola Parish, executive director frontline regulation, saying that the new regulations will give an extra layer of scam protection for savers.
The consultation, 'Pension scams: empowering trustees and protecting members' proposes to introduce new requirements on trustees and scheme managers, implementing provisions in the Pension Schemes Act 2021.
Pensions minister Guy Opperman said trustees will be "in the driving seat" with the new regulations, adding: "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."
The Pensions Regulator has welcomed the consultation proposals. Nicola Parish, executive director frontline regulation, saying that the new regulations will give an extra layer of scam protection for savers.
“Along with preparing to change their processes to comply with the regulations, trustees and pension providers should continue to play their part in stopping scams. This includes reporting all suspected scams to Action Fraud, or by calling 101 in Scotland," Parish said, and called on the industry to sign TPR's pledge on combating scams.
However, chief executive of investment platform AJ Bell, Andy Bell, said the regulations were "ill-conceived" and risk blocking legitimate activity. In particular, Bell criticised the DWP's plans to create a 'safe destination' list of schemes, which currently exclude platforms, urging it to abandon the idea.
“It is crucial in designing any protections for savers that the cure is not worse than the disease," said Bell.
However, chief executive of investment platform AJ Bell, Andy Bell, said the regulations were "ill-conceived" and risk blocking legitimate activity. In particular, Bell criticised the DWP's plans to create a 'safe destination' list of schemes, which currently exclude platforms, urging it to abandon the idea.
“It is crucial in designing any protections for savers that the cure is not worse than the disease," said Bell.
“Classifying insured pension schemes as a safe destination, whilst excluding platform pensions is arbitrary. The thinking that all insured schemes are inherently safe shows the government has forgotten the Equitable Life scandal," he argued.
The proposals would introduce the following new requirements
The proposals would introduce the following new requirements
- To confirm the transfer is to one of a number of types of receiving scheme which present a low scams risk, by virtue of the requirements of those schemes; if that is the case the transfer proceeds without any further checks or requirements for members to provide further evidence or information to the trustee or scheme manager.
- If the transfer is not to one of those listed types of scheme, members can exercise their statutory right to transfer on condition that certain prescribed evidence is provided. Trustees need to confirm the member has demonstrated an employment link between themselves and the occupational pension scheme they wish to transfer to. If they wish to transfer to a QROPS and they can’t demonstrate an employment link, they will be required to demonstrate residency in the same financial jurisdiction as that of the scheme to which they wish to transfer. Where these employment and residency conditions are met, the transfer proceeds.
- If neither I nor II apply, then the trustees or scheme managers must decide if any of the prescribed circumstances that would prevent a transfer are present. We refer to these as ‘red flags’. Should any of these be present, the transfer may not proceed. If the red flags are not present, the trustees or scheme managers must decide whether any of the circumstances where the member must be referred to specified scams guidance apply. If these are present, the transfer may only proceed once the member provides evidence of having taken the guidance. We refer to these as ‘amber flags’. Where they decide the flags are not present, the transfer proceeds.
- The trustees or scheme managers are not required to seek information from the member to identify whether the red or amber flags are present but have the power to do so if needed. They may be able to decide that the red and amber flags are not present without the need for additional checks or activity to that which they already undertake as part of their current processes.
The consultation closes at 11.59pm on 9 June.
