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Pension schemes to issue COVID-19 transfer warning to savers

Ref: PN20-15

Issued: Wednesday 29 April 2020

Savers looking to transfer from a defined benefit (DB) to a defined contribution (DC) pension during the COVID-19 crisis will be warned it’s unlikely to be in their best long-term interests in a letter from regulators.

Under guidance published by The Pensions Regulator (TPR) today, trustees are asked to send DB members looking to move retirement funds a letter warning them of the risks during the pandemic and urging them to consider the decision carefully.

Since 2015, pensions freedoms have given scheme members more flexibility in how they can access their pension. Many have taken advantage of this flexibility and last year £34 billion was transferred from DB schemes.

However, with COVID-19 causing market volatility and an uncertainty for businesses and personal finances, pension members could be at risk of making knee-jerk decisions which hit their pensions.

Charles Counsell, TPR’s Chief Executive, said:

"We are determined to do all we can to protect savers' retirements from the unprecedented impact of COVID-19.

"A decision to transfer a pension pot that’s taken a lifetime to build is a very serious one and we'd urge members to be very, very careful making any transfer decisions at this time.

"That’s why for the foreseeable future, anyone who is looking to transfer their benefits out of their DB scheme should be sent a new warning letter to make them stop and think as well as point them towards free, impartial guidance available from The Pensions Advisory Service."

Pandemic guidance

Since COVID-19 emerged, TPR has issued guidance to help schemes and employers deal with emerging risks and how trustees should be communicating with their members.

In today’s guidance, the regulator is calling on trustees to:

  • highlight the free, impartial pensions guidance from Pension Wise, including phone appointments and online information
  • encourage members to take regulated advice to understand their retirement options
  • identify increased risks in how a member has decided to access their pension funds and give appropriate warnings of the risks and implications of their chosen option
  • send all DB members requesting a cash equivalent transfer value (CETV) a template letter signed by TPR, the Financial Conduct Authority (FCA) and the Money and Pensions Service, which runs The Pensions Advisory Service
  • monitor CETV requests and inform FCA of unusual or concerning patterns, such as spikes or the same adviser across multitude of requests

Scams

Pension scams are devastating, and the most recent figures show that victims of pension frauds lost on average £82,000, for some their entire life savings.

Trustees are the first line of defence in protecting retirement funds and have a key role in ensuring members make informed choices.

To guard against scammers, TPR urges trustees to follow the Pension Scams Industry Group code of good practice.

This guide has practical steps for carrying out due diligence and assessing transfer requests and example letters for communicating with members throughout the transfer process.

Additionally, trustees should direct their customers to the ScamSmart website to learn how to protect themselves from pensions scams.

Notes for editors

  1. DB pension transfers hit £34 billion in 2018/19, this figure. This figure accounts for all transfers from a DB scheme, including but not limited to DB to DC transfers.
  2. A copy of The Pension Scams Industry Group code of good practice (PDF) can be downloaded from the Pensions and Lifetime Savings Association website.
  3. Guidance on the FCA’s expectations for defined benefit pension transfer advice during COVID-19 can be found on the FCA website.
  4. Law enforcement, government and private sectors partners are working together to encourage members of the public to be more vigilant against fraud, particularly about sharing their financial and personal information, as criminals seek to capitalise on the COVID-19 pandemic.
  5. TPR is a member of Project Bloom. Bloom was created in 2012 and brings together government departments, agencies, regulators, law enforcement bodies and representatives of the pension industry to tackle pension scams. The other partners include the FCA, the Money and Pensions Service, the Department for Work and Pensions, HM Treasury, the Serious Fraud Office, City of London Police, the National Fraud Intelligence Bureau, Action Fraud, the Pensions Scams Industry Group, the Information Commissioner’s Office, the Insolvency Service, National Trading Standards and the National Crime Agency.
  6. TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).

Press contacts

Dan Menhinnitt

Media Officer
pressoffice@tpr.gov.uk
01273 349511

Matt Adams

Media Relations Manager
pressoffice@tpr.gov.uk
01273 662086

Out of hours

This is for journalists only with a media enquiry. The below number will divert to our on call media officer.
pressoffice@tpr.gov.uk
01273 648496

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