Providers urged to review due diligence and use ‘common sense’ as new scam regs come into force

Pension providers have been urged to review their due diligence, while using “common sense” to ensure there is no transfer gridlock, as new scam transfer regulations come into force today (30 November).

The new rules require providers to raise red or amber ‘flags’ on pension transfers that could be scams in an effort to block fraudulent transfers.

Schemes will now have the power to block pension transfers where reg flags are raised, while amber flags will require the transferring member to speak to Pension Wise before proceeding.

Commenting on the new rules coming into force, AJ Bell head of retirement policy, Tom Selby, warned that overzealous blocking of legitimate transfer could “cause consumer harm and lead to a barrage of Ombudsman complaints”.

“The government has been crystal clear that it expects providers to use their common sense when implementing its anti-scam rules,” he continued.

“Despite this, there have been some suggestions pension schemes might take an overzealous approach to amber flag warnings because they are risk averse.

“Anyone going down this road leaves themselves open to complaints to the Ombudsman.

“While protecting members from scams is extremely important, people making legitimate transfers will not stand for unjustified delays.”

Selby noted that if the new rules were applied “proportionately” they would hand more powers to providers while allowing the “vast majority” of legitimate transfers to proceed.

Also commenting on the rules coming into force, Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, called on providers to review their due diligence.

“These regulations are a powerful tool in the fight against scammers with schemes given the ability to stop transfers or refer members for guidance if they have concerns,” she stated.

“Keeping due diligence processes robust and proportionate will be key in ensuring these rules work as well as they should.

“If schemes make excessive or unnecessary checks then there’s a chance MoneyHelper could be swamped and transfers that should otherwise have been straightforward could be delayed.

“The ability to undertake provider level due diligence and to then make a discretionary transfer if providers have no concerns is what will allow the 95 per cent of genuine transfers to proceed without delay.

“To be as well prepared as possible providers and schemes will have reviewed their processes to make sure they stand up to scrutiny.”

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