Out-Law News 2 min. read
10 Nov 2020, 1:55 pm
The UK government has confirmed the regulations it will be bringing forward to address transfers to suspected pension scams will go further than previously suggested.
The government will be bringing in regulations on the back of the Pension Schemes Bill that will remove the statutory right to a transfer in circumstances including where there is not a “genuine employment link” between a member and an occupational pension scheme.
However, the government has stated now that additional restrictions on the statutory right will be introduced when the existence of certain 'red flags' is established at the point when a transfer request is being considered.
Speaking at a meeting of the House of Commons Public Bill Committee on 5 November to debate the Pension Schemes Bill, pensions minister Guy Opperman said the government wanted to “bring forward measures that will significantly and realistically prevent future scams”.
The regulations will impose conditions on transfers that will enable trustees to refuse the transfer. Opperman said these would relate to both the destination of the transfers, meaning transfers can be prevented to schemes that do not have the right authorisation, or cases where the member has not supplied the evidence of employment or residency.
“Importantly, those conditions can also include other red flags, such as who else is involved in a transfer. If those red flags are apparent, the regulations will enable the trustees to refuse to transfer,” Opperman said.
Opperman said the conditions would be applicable to both defined benefit (DB) and defined contribution schemes, in addition to current advice requirements for DB members seeking to transfer over £30,000.
The news has come as The Pensions Regulator called on pension providers, trustees and administrators to protect savers by joining a pledge to combat scams.
The announcement by Opperman was also confirmed in correspondence (3 page / 552KB PDF) between himself and Work and Pensions Committee chair Stephen Timms, following lobbying on the issue by the Pension Scams Industry Group, which had proposed an amendment to clause 125 (12 page / 560KB PDF) of the Pension Schemes Bill.
The amendment is now unlikely to be passed as the government believes clause 125 is sufficiently broad to allow the government to set out any limitations to the right to transfer in regulations.
Pension scams expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law, said: “This removes any doubt that the government has now recognised the need to allow the existence of certain ‘red flags’ to cause a member’s statutory right to a transfer to be removed.
“We can expect to see some significant changes through the regulations that will follow implementation of the Pension Schemes Bill. That is critical if meaningful progress is to be made in reducing the number of transfers to pension scams,” Fairhead said.
Fairhead said there needed to be more work on the detail of the regulations to ensure the specific red flags chosen would be objective enough to enable trustees to reach more straightforward decisions about tricky transfer requests.
“Too much discretion will cause uncertainty. This is very much a step in the right direction though, and it paves the way for some constructive discussion around the precise nature of the conditions that can be brought in,” Fairhead said.
Fairhead said it was “imperative” that schemes registered with the UK’s Financial Conduct Authority (FCA) were not carved out of the regulations. Such schemes include so-called ‘international self-invested personal pensions’ which Fairhead said had been the source of greatest concern within the industry when looking at likely current models favoured by pension scammers.
“Pension scams are like whack-a-mole – their nature keeps changing so it is important that the government does keep up and enables trustees to deal with today’s problems rather than simply yesterday’s,” Fairhead said.
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