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New pension transfer rules that aim to stop scams now in force


Publication date:

15 December 2021

Last updated:

15 December 2021


Technical Connection

New pension transfer rules came into effect from 30 November 2021 aimed at reducing the risk of pension savers succumbing to pension scams. 

The rules were announced when DWP published the outcome to its consultation on 8 November, giving providers a very short timescale to implement the necessary changes to their processes. 

The new rules mean that trustees and scheme administrators will be able to prevent a transfer where a ‘red flag’ is identified.  A ‘red flag’ is raised where there are clear signs of fraud or methods frequently used by scammers.  

In other circumstances where a potential scam is suspected, scheme trustees and administrators can raise an ‘amber flag’ which will lead to a pause in a transfer until a member takes specific scrams related guidance from the Money Helper service.

The rules were simplified as part of the consultation process and the regulations now split transfers into two broad conditions.

Schemes covered by the First Condition retain the guarantee of the statutory right to transfer.  This applies to receiving schemes which are:

  • a public service pension scheme
  • an authorised Master Trust scheme
  • an authorised collective money purchase scheme.

The Second Condition applies to transfers to all other schemes. These break down into two sub sections, known as Type 1 and Type 2.

Type 1 are transfers where the trustees or administrators have already carried out sufficient due diligence on the receiving scheme to decide that the red flags and amber flags are unlikely to be present.  The consultation response estimates this at about 95% of transfers.  In these cases, the transfers can proceed.   This allows schemes to create what effectively amounts to a “Green List”, which are schemes they are comfortable are not used for scams. This is where many may rely on providers such as Origo combined with their historic due diligence checks to determine what the risks are.

Type 2 are where trustees or administrators are either required to carry out additional due diligence activity under the regulations or choose to, as they believe flags may be present.  Where the receiving scheme is an occupational scheme or a QROPS, proof of employment or residency will be required to confirm the statutory right to transfer.   In other situations where they believe flags may exist, schemes must seek further evidence about the presence of flags.  Following this, if they believe no flags are present then the transfer can proceed.

If after seeking evidence they believe a “red flag” is present the scheme can prevent the transfer, that is, essentially they are able to override the statutory right to transfer.  Scheme are permitted to use their discretion to allow the transfer but of course doing so will mean they are likely to be at risk it anything does go wrong.

If they believe an ‘amber flag’ is present, then the member must provide evidence that Money Helper guidance has been received in order for the transfer to proceed.

Given the very short timescales providers have had to implement the new rules there are likely to be some initial teething problems and delays in processing transfers while they get to grips with them.   There are also questions as to whether the Money Helper service will have sufficient capacity to cope with the demand, particularly if providers take a very cautious approach.  However, hopefully once they are bedded in, the revised rules will go a long way to helping prevent pensions scams but also avoid unnecessary delays for genuine transfers.

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This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.


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