The Department for Work and Pensions (DWP) has been urged to consider introducing a requirement for pension schemes to provide savers information on pension transfer amber flags, in an effort to provide greater clarity and address ongoing delays

The comments were made after a freedom of information request from Quilter revealed that four fifths (80 per cent) of all amber flags raised during the first year of the new regulations were raised for either an unknown reason, or for a potentially low risk transfer relating to overseas investments.

The FOI data from the Money and Pensions Service (Maps) revealed that of the 8,395 MoneyHelper Pension Safeguarding Guidance (PSG) sessions that were conducted since the regulations were established in November 2021, nearly half (44 per cent or 3,670) were conducted for an ‘unknown’ reason.

In addition to this, more than a third (36 per cent or 3,019) were conducted after a flag was raised on potentially low-risk transfers relating to overseas investments.

Within the same FOI request, Quilter asked for clarification on whether Maps would ever consider requiring confirmation of the specific reason why an amber flag was raised, suggesting this could help improve both the customer’s understanding and data collection.

In response, Maps stated: “There is no requirement within the regulations for pension schemes to inform their members which flag(s) has been identified during their due diligence process. The only requirement is that they tell their members if a flag(s) is identified.

“At the request of DWP we will continue to record if our customers have been informed of the flag identified by their scheme, but we do not anticipate the number of unknown flags to change significantly. This has no impact on the guidance session delivered to our customer.”

Adding to this in a separate response, Maps stated: “As part of the guidance session we do ask our customers if they are aware of which flag has been raised and if known this is recorded as part of our MI.

"A large proportion of our customers are not aware of the particular flag or are unwilling to disclose this to us – this is recorded as unknown on our records.”

Although Quilter highlighted this confirmation from Maps as a “real positive”, showing that Maps proactively gathers information from the customer on the reason for the amber flag, it argued that given the significant number of ‘unknowns’, there may be a lack of information being provided to members by pension schemes.

More broadly, whilst Quilter agreed that it is a positive that so many people have been saved from fraudsters, it argued that the current drafting of the rules is not specific enough, and has led "many" savers to take guidance before they are able to make even a low-risk transfer.

The firm also highlighted reports of “significant delays” in the facilitation of pension transfers by administrators, as well as issues in booking a MoneyHelper guidance session in a timely manner which have caused problems for advisers and clients alike.

With the government having committed to conducting a full review of the regulations within 18 months of them being adopted, Quilter called on the DWP to consider making it an explicit legislative requirement for all pension schemes to provide clear and accurate information to customers on the reason an amber flag has been raised within its review.

Additionally, it called on DWP to bolster the resource available for Maps guidance sessions to ensure customers are seen within a reasonable timeframe to help make the process as stress free and efficient as possible.

Quilter head of retirement policy, Jon Greer, stated: “There should be no doubt that the first year of the new pension transfer regulations has helped save people from fraudsters and has given pension scheme trustees and managers real power to safeguard people against pension scams where historically they could only look on in helpless paralysis.

"However, the positive outcomes have been somewhat watered down by issues faced in the practical application of the rules, as well as a potential lack of information being provided to members which leads to weakened data collection and difficulties in assessing the effectiveness of the regulations.

“We have known for some time that the lack of clarity in the legislative drafting has resulted in a clear divergence between policy intention and the practical application of the law, but our latest correspondence with the Money and Pensions Service shows the issues could also lie with insufficiently clear disclosure to members.

“While these ongoing issues have caused difficulties in the last year, it is clear the DWP is aware of them and understands the need for clarification.

"It is vital that the DWP’s ongoing review and subsequent report goes far enough to fully address and resolve the ongoing issues as soon as possible as Maps is a valuable resource which needs to be used efficiently.

"Therefore, we ask that the DWP seriously considers making it a legal requirement for schemes to provide their members with clear and accurate information on the reason for an amber flag being raised within this review.”

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