Transfers to SSAS will raise amber flag even with employment link
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The government will go ahead with changing the regulations that govern transfers and has made tweaks to its proposals, including a new amber flag for transfers to small self-administered schemes where an employment link has been shown.
Pensions minister Torsten Bell said amendments to the regulations will be laid "in due course, with a planned coming into force date in April 2027".
Pensions minister Torsten Bell said amendments to the regulations will be laid "in due course, with a planned coming into force date in April 2027".
"Setting out our position now provides trustees, scheme administrators, and other stakeholders with early notification of the changes we intend to make. We will continue to work with industry and regulators to ensure a smooth implementation of these changes," he added.
The changes are being made after a consultation in the summer and will mean that a new red flag will be created that can be raised when a member asks to transfer into a small self-administered scheme but is not able to show an employment link with the receiving occupational scheme.
While most respondents were supportive of this, eight argued that stronger protections were needed. The Society of Pension Professionals worried that legitimate SSAS members who do not receive standard salaries might not be able to evidence an employment link.
Given the feedback, the government said it will support trustees with details of the type of information and evidence which may be considered when making their assessment, saying that "this will extend to the circumstances raised in some responses, such as eligible family members and other office holder relationships in addition to the employment link test".
In addition, the Department for Work and Pensions will now also introduce an amber flag for transfers into a SSAS "where an employment or other relevant relationship has been demonstrated and the transfer is otherwise able to go ahead", which will require the transferring saver to attend a MaPS guidance appointment.
Transfer regulations will be relaxed where trustees are satisfied that the receiving scheme is a "reputable" scheme. While some had suggested alternative words, the DWP has stuck to its own definition.
As proposed, transferring members will no longer be required to have multiple appointments with the Money and Pensions Service if they had MaPS guidance in the last 12 months, but the government has now said that transfers into SSAS will not be eligible for this exemption.
As proposed, transferring members will no longer be required to have multiple appointments with the Money and Pensions Service if they had MaPS guidance in the last 12 months, but the government has now said that transfers into SSAS will not be eligible for this exemption.
The DWP is also removing the need to raise an amber flag where a scheme contains overseas investments, which the pensions industry has long said creates unnecessary work as most schemes diversify investments geographically.
Partner at Arc Pensions Law Ben Fairhead said while the final wording is not yet clear, he expects few changes from what was proposed in June, with the DWP sticking to 'reputable' to describe schemes that will not automatically raise flags.
"That is likely to be the biggest change facing the industry. We can expect to see that in force come April next year. To the extent trustees and providers are not already operating with the use of green [or] clean lists, this might well become the norm," he said.
Fairhead said the government has not made clear if the non-exhaustive list of factors used to assess whether a scheme is “reputable” will be included in guidance or built into the regulations themselves.
"Guidance would be preferable in our view to allow better scope for evolution of the factors as scams have a habit of changing over time. Either way though, advanced sight of that list will be critical: those handling transfer requests will need to be ready with modified processes before the amended regulations take effect,” he argued.
Partner at Arc Pensions Law Ben Fairhead said while the final wording is not yet clear, he expects few changes from what was proposed in June, with the DWP sticking to 'reputable' to describe schemes that will not automatically raise flags.
"That is likely to be the biggest change facing the industry. We can expect to see that in force come April next year. To the extent trustees and providers are not already operating with the use of green [or] clean lists, this might well become the norm," he said.
Fairhead said the government has not made clear if the non-exhaustive list of factors used to assess whether a scheme is “reputable” will be included in guidance or built into the regulations themselves.
"Guidance would be preferable in our view to allow better scope for evolution of the factors as scams have a habit of changing over time. Either way though, advanced sight of that list will be critical: those handling transfer requests will need to be ready with modified processes before the amended regulations take effect,” he argued.
