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New regulations empower trustees to halt suspicious transfers

Ref: PN21-30

Issued: Monday 8 November 2021

The Pensions Regulator (TPR) has today (Monday) published guidance helping trustees understand their new powers to halt suspicious transfers.

The regulations, arising from the Pension Schemes Act 2021, introduce a system of red and amber flags, giving trustees the power to refuse transfers where there's a heightened risk it may be part of a scam.

Both the regulations and guidance were drafted with close co-operation between the Department for Work and Pensions (DWP), TPR, the Money and Pensions Service (MaPS) and the Pension Scams Industry Group (PSIG).

Most pension transfers are legitimate and can proceed with minimum intervention. However, PSIG estimates 5% of all transfer requests give trustees and scheme managers cause for concern.

Nicola Parish, TPR's Executive Director of Frontline Regulation, said: "We welcome these new regulations which further empower trustees to act as the first line of defence against scammers.

"We are pleased these new rules enshrine in legislation two of the key parts of the pledge to combat pension scams  around due diligence measures and issuing members warnings of high-risk transfers.

"We urge all trustees and pension providers to take note of these new rules and continue to play their part in stopping scams. This includes reporting all suspected scams to Action Fraud, or by calling 101 in Scotland.

"The pension industry can continue to demonstrate its commitment to stopping the scourge of scammers by joining our pledge campaign."

Margaret Snowdon, Chair of PSIG, added: "PSIG welcomes TPR's new guidance for trustees on changes to transfer regulations.

"We were pleased to work closely with TPR and DWP to deliver the changes we called for and we now urge the industry to apply the new conditions for the statutory right to transfer in order to safeguard members' benefits.

"Schemes that already carry out due diligence checks and maintain clean lists of transfers destinations should be well prepared for the new rules and the majority of transfers should proceed without delay  the purpose of the changes is to allow trustees to say no when faced with scam signs.

"PSIG is working on a revised version of its Scams Code, which we will publish later in the year, to give practical help on how to use the new rules."

Notes for editors

  1. Transfer checks: Section 125 of the Pension Schemes Act 2021 specifies new regulations for trustees that will require checks to be undertaken before making a transfer. Transfers can proceed with no further checks to authorised master trusts, authorised collective defined contribution schemes, and public service schemes. Trustees and providers can also maintain a 'clean list' of personal pension schemes they have reason to believe are not being used for scams. For other transfers, trustees will have to assess evidence of employment links to receiving occupational pension schemes (and residency when overseas). Concerns may raise amber flags requiring a member to get guidance from MoneyHelper  provided by MaPS  or red flags which enable the governing body to stop the transfer. The government has committed to a review of these regulations within 18 months of them coming into force to ensure they remain effective in targeting the evolving methods used by scammers.
  2. Pledge to combat pensions scams: Last year, TPR launched its pledge to combat pension scams campaign, supported by the Pension Scams Industry Group. The voluntary scam-busting campaign called on the pensions industry to commit to six saver-protecting actions. New transfer rules have seen two of the pledge's six principles  around due diligence measures and issuing members warnings of high-risk transfers – enshrined in regulations. The pledge has been adapted to account for this and will remain a voluntary opportunity for schemes to demonstrate their commitment to protecting members and intention to do more than the legal minimum, including following the principles of the PSIG Code of Good Practice. So far, more than 350 organisations have pledged or self-certified they are following the principles of the pledge to combat pension scams. This includes 25 members of the Pensions Scams Industry Forum and 20 master trusts.
  3. The Pensions Regulator 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).

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