Third of risky transfers slip through new pension rules

One in three high risk pension transfers since July 2018 would satisfy the first condition of the Department of Work and Pensions’ (DWP) proposed scam reduction legislation, according to a new report. These transfers would not be flagged under the proposed legislation, according to data from XPS’ Scam Protection Service. Out of 462 transfers flagged as high risk of a scam by XPS, 37% met the first condition for no further checks under the new legislation. For the 1,143 transfers flagged as at some risk of a scam by XPS, 69% would meet the first condition. The proposed legislation would give trustees greater ability to prevent transfers where there is a risk of a pension scam. However, XPS has warned that trustees must not solely rely on the conditions laid out by the DWP and must continue to carry out their own scam protection measures. Mark Barlow, partner at XPS Pensions Group, said: “The ability for trustees to block transfers in certain circumstances is a welcome step forward in the fight against pension scams. However, we are concerned that these conditions could suggest that certain transfers are “scam free” when we know this not to be the case. Evidence from our Scam Protection Service demonstrates how robust scam protection measures will continue to be vital in protecting member outcomes”. The draft legislation from the DWP introduces four conditions, one of which would need to be passed for a member to retain their statutory right to transfer. The conditions are: 1 - A transfer is to a public sector pension scheme, an authorised Master Trust, an authorised Collective Money Purchase Scheme or a Personal Pension through an insurer (with appropriate authorisations and registrations). 2 - The transfer is to an occupational pension scheme and the individual can demonstrate an employment link. 3 - The transfer is to a Qualifying Registered Overseas Pension Scheme and the individual can demonstrate either an employment link (under the second condition) or a residency link. 4 - The transfer does not exhibit any “red flags” or “amber flags”, as defined in the consultation. A transfer exhibiting an ember flag can only proceed if the individual can demonstrate that they’ve taken expert scams guidance from the Money & Pensions Service.

Third of risky transfers slip through new pension rules

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