To quote the Department of Work and Pensions: “pension scams are a menace”. Until now, trustees’ hands were tied where a member had a statutory right to transfer their benefits and, even in cases where the receiving arrangement appeared to be a scam, they were obliged to make the transfer.
Regulations introduced on 8 November empower trustees for the first time to act on their concerns and in certain circumstances refuse to make a statutory transfer.
Trustees will be required to confirm that one of two new conditions is met before they can make a statutory transfer. The conditions and accompanying checks are intended to flush out the most common indicators of a pension scam. The regulations and accompanying guidance from The Pensions Regulator set out in detail the additional steps that trustees and administrators will be required to take.
Taking action to safeguard members’ benefits and scupper the scammers is clearly a good move, but time is short for trustees and administrators to get to grips with the new requirements and incorporate them into existing transfer processes by the time they come into force on 30 November.
It is expected that in most cases transfer requests will proceed with minimal intervention, and only a small minority of cases will require further checks. That being said, trustees will need to manage members’ expectations about the transfer process and keep them updated on the status of their transfer request.
It remains to be seen how the new requirements will bed in over time and if they will be successful in preventing transfers to scam arrangements. The UK government has committed to review the regulations within 18 months to ensure that they remain effective in targeting the evolving methods used by scammers.
Kirsty Pake is a senior associate at law firm Sackers