DWP proposes giving trustees power to halt pension transfers

Trustees and scheme managers would have the power to halt pension transfers or seek further information from transferring members under new proposals from the Department for Work and Pensions (DWP).

The proposals, which are expected to be implemented in the autumn and are being analysed as part of the DWP’s consultation on dealing with pension scams, also outlined the circumstances in which transfers would be permitted to proceed without incident.

The first of these would be if the receiving scheme is of a variety which presents a low level of scam risk, while the second is if members are seeking to transfer to an occupational pension scheme which they have an evidenced employment link to.

If neither of these scenarios apply, trustees or scheme managers would be required to search for ‘red flags’, the presence of which would lead to them halting the transfer, or ‘amber flags', the presence of which would require them to ensure that the transferring member has received scams guidance before proceeding.

DWP acknowledged that these proposals, which would apply to all members without exception, would lead to extra costs, but argued that the measures would protect both pension savers and trustees or scheme managers.

The government department called for more comments from businesses about how the proposals and the possible transfer delays which they might lead to were likely to impact business’ operations and costs.

Other questions included in the consultation, which runs until 9 June, called for input into how ‘red flags’ should work in practice, with the list of warning signs including members being offered free pension reviews and receiving unsolicited contact from the receiving scheme.

Pensions Minister Guy Opperman commented: “These new measures will enable trustees to prevent a transfer request if they see evidence of ‘red flags’. They will also, for other potentially fraudulent transfers, prevent people’s hard-earned savings being moved to suspect schemes without them receiving expert guidance.

“These conditions can relate to both the destination of the transfer or where the pension saver is unclear about how their money will be invested or how much they will be charged for their savings to be managed. These measures empower trustees and managers to act and build on the ban on pensions cold calling and tougher rules to stop scammers opening fraudulent pension schemes government has already introduced.

“I have listened to industry about the important part trustees play in preventing scams and believe the conditions on transfers set out in the draft regulations attached to this consultation put them in the driving seat when it comes to pension transfers.”

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