The UK’s Department for Work and Pensions (DWP) has issued new measures to help protect pensions savers from online pension scam transfers.
The measures come into force on 30 November and give pension trustees and scheme managers the power to halt a transfer if they deem necessary.
The move follows a response to DWP’s consultation Pension Scams: Empowering Trustees and Protecting Members, launched last May seeking views on the draft Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021, which enable trustees and scheme managers to prevent or pause a transfer request if they see evidence of ‘red flags’ or ‘amber flags’.
Minister for Pensions Guy Opperman said: “We are tackling the scourge of pension scams in practical terms to safeguard pensioners’ hard-earned savings.”
He added that these measures will provide better protection for savers.
Fraudsters frequently offer “too good to be true” incentives such as free pension reviews, early access to pension cash, or other time-limited offers. Lured in by these bogus offers, targets are then conned into transferring their savings into a scam scheme and fleeced of their savings, DWP stated.
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA), said: “Trustees will be able to stop a transfer where a red flag is raised or pass the potential scam victim to MoneyHelper where there is an amber flag or they have doubts about the entity being transferred to. Also very welcome is the commitment to review the measures in 18 months to stay ahead of the scammers.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “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.”
She encouraged pension schemes to 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.”
Margaret Snowdon, chair of the Pension Scams Industry Group (PSIG), noted that the removal of a statutory right to transfer in circa 5% of cases where there are serious scam signs and the opportunity for members to be referred for impartial guidance where appropriate, is a significant and welcome step forward.
“It is vital that the measures are proportionate and manageable, so PSIG will be issuing practical guidance and publishing version 3.0 of our Scams Code shortly,” she added.
Big changes too soon?
Daniel Jacobson, senior consultant and the lead of LCP’s pension scams group, welcomed the new regulations, but said that although DWP has stated that 95% of transfers do not have scam risks, these new checks will still need to be applied to 100% of transfer requests in order to identify that rogue 5%.
“And whilst these regulations will help protect members, there is only a three-week period before they come into force. This is a small window of time for what will mean big changes in how trustees and administrators deal with scams,” Jacobson added.
Pension scheme “will need to start working now to update their processes, procedures and communications to members”, he said.
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