Opperman confirms plans for additional scam 'red flag' requirement in Pension Schemes Bill

Pensions Minister, Guy Opperman, has confirmed that the government intends to introduce an additional requirement to the Pension Schemes Bill to help combat pension scams.

In a letter to Work and Pensions Select Committee Chair, Stephen Timms, Opperman stated that, in addition to what is within the scope of clause 125, the government expects to introduce an information and guidance requirement where additional ‘red flags’ are identified in the transfer process.

Opperman stated that the department would work with the Pension Scams Industry Group (PSIG) and others to develop these proposals.

Currently, clause 125 of the Pension Schemes Bill would allow regulations to be made to stipulate the conditions which persons, including a pension scheme member, will need to meet to have a statutory right to transfer their pension savings into another scheme.

However, Opperman confirmed in the letter that whilst broad, the powers under the clause are "not without limits", and as drafted, do not fully cover the top four ‘red flags’ highlighted by the committee and PSIG.

He stated: “I appreciate that the clause as drafted does not satisfy the specific proposals set out by the committee and the PSIG however, this is a significant step forward in protecting members from falling victim to scams.

“Most importantly, the clause enables regulations to prevent trustees from using the cash equivalent sum unless specified conditions are met – in practice, removing the statutory right to transfer.

“This is a significant power which I’m sure you will welcome.”

Indeed, Opperman highlighted how the powers under the current drafting would be able to address the top four red flags identified by the committee.

One such red flag was if the receiving scheme or parties in the transfer did not having the required permissions from the Financial Conduct Authority (FCA).

Opperman stated that this was "achievable" under clause 125, as the regulations could require trustees to ensure that the destination organisation has the required authorisations under FSMA.

He stated that this would achieve a similar policy outcome to the inclusion on the FCA warning list of an entity operating without permission which the FCA believe is a scam.

He explained however, that the clause only provides for the Secretary of State to set the transfer conditions, and does not allow for sub-delegation, which reference to the FCA warning list would be considered, and as such, explicit reference to the list would not be allowed.

Opperman also addressed the red flag of whether the member was contacted via social media, email or cold calling, or was offered free pension reviews or early access to cash.

Opperman emphasised that this is again "achievable" under the powers of clause 125, as regulations could set conditions relating to the type of person or organisation who contacts the member about the transfer, as well as setting conditions on the platform by which contact is made.

The red flag of pressure to transfer quickly was also highlighted as "deliverable" by Opperman, although he clarified that the government will need to define “quickly” to ensure trustees or administrators are not being asked to use their judgement.

In addition to this, the committee had also raised the red flag of whether the receiving scheme is registered with HMRC, which Opperman stated could be prescribed under the powers in clause 125.

However, he clarified that whether there is a strong enough link between whether a scheme is HMRC registered and the risk of scams would need to be explored further first.

"Registration can rely on self-declaration and we would not want to suggest that being registered or not is a clear signal of whether a scheme is a scam or not," he explained.

The letter was written ahead of the Pension Schemes Bill second reading in the House of Commons yesterday (7 October), where Labour announced plans to push for further measures in the committee stage, including a widening of auto-enrolment.

    Share Story:

Recent Stories

Are current roads into retirement delivering member value?
Laura Blows explores HSBC Master Trust’s recent report, Converting pension pots into incomes, with HSBC Retirement Services CEO, Alison Hatcher.

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

Pension portfolios – the role of asset-backed securities
Laura Blows is joined by Royal London Asset Management (RLAM) head of sterling credit research, Martin Foden, and its Senior Fund Manager, Shalin Shah to discuss the role of asset-backed securities (ABS) within pension fund portfolios
Incorporating ESG into fixed income
Laura Blows is joined by TCW head of fixed income ESG, Jamie Franco, to discuss incorporating environmental, social and governance (ESG) strategies into fixed income portfolios