Scams

General code in force: 28 March 2024

1. Pension scams can occur when members seek to transfer their benefits to a different arrangement, take early retirement or take their benefits.
2. When processing a transfer, governing bodies must check that at least one of the conditions for the transfer to proceed is met (see Transfers out)¹.
3. Under section 249A of the Pensions Act 2004², governing bodies of certain schemes must establish and operate an effective system of governance (see Systems of governance) including internal controls (see Internal controls). However, there are certain exemptions³. The system of governance must be proportionate to the size, nature, scale, and complexity of the activities of the scheme.
4. Under section 249B of the Pensions Act 2004, scheme managers of public service pension schemes⁴ are required to establish and operate internal controls, which are adequate for the purpose of securing that the scheme is administered and managed in accordance with the scheme rules⁵, and with the requirements of the law.
5. As part of their internal controls, governing bodies should ensure that they take appropriate steps to mitigate the risk of scams.
6. Governing bodies should be aware of the warning signs of a scam and consider whether any are present when dealing with member requests to transfer or take their benefits.
7. When members ask to transfer out of a scheme, the governing body should carry out due diligence on the scheme to which the member wishes to transfer, to check whether the transfer can legally be paid.
8. Governing bodies should take steps to ensure their members are aware of the risks of pension scams.
9. They may do this by providing clear information on how to spot a scam in all relevant communications to members, including within standard communication materials such as the retirement wake-up pack and in annual benefit statements. Scams warning messages may also be placed on the scheme’s website.

Governing bodies can also pledge to do more to combat scams and follow the principles of The Pension Scams Industry Group (PSIG) 'Combating Pensions Scams – A Code of Good Practice'. Further information can be found on our website.

Legal references

¹ Regulations 7 and 8 of the Occupational and Personal Pension Schemes (Conditions for Transfer) Regulations 2021

² Article 226A of The Pensions (Northern Ireland) Order 2005

³ Section 249A(3) of the Pensions Act 2004 [Article 226A (3) of The Pensions (Northern Ireland) Order 2005]

⁴ As defined in in section 318(1) of the Pensions Act 2004 [Article 2(2) of The Pensions (Northern Ireland) Order 2005]

⁵ As defined in Section 318(2) of the Pensions Act 2004 [Article 2(3) of The Pensions (Northern Ireland) Order 2005]