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Pension providers given powers to block suspicious transfers

Shekina Tuahene
Written By:
Shekina Tuahene

Pension providers will be able to block or pause pension transfers if there are concerns around fraudulent activity from today.


The Department for Work and Pensions (DWP) announced there would be a change to legislation earlier this month following a consultation into pension scams. 

Now, providers will have the authority to immediately block pension transfers where ‘red flags’ are raised.  

Providers can pause a transfer where ‘amber flags’ are raised and refer savers for further guidance. The transfer will only be able to proceed if savers can prove they have taken guidance from the Money and Pensions Service’s (MAPS) Pension Wise. 

The DWP said it expected the majority of transfers to be considered safe and continue with little to no intervention. 

A set of conditions will need to be met for a pension transfer to proceed. The first condition states that the transfer must be to a list of recognised schemes such as the Public Service Pension Scheme or authorised MasterTrusts. 

If the transfer is not to one of the listed schemes, the second and third conditions suggest the transfer should be to a UK occupational pension scheme or a qualifying recognised overseas pension scheme (QROPS). 

Members can transfer their pension to QROPS if they can prove an occupational or residential link as without this, the saver could be at risk of a scam. 

If these are satisfied, a transfer can proceed. 

The fourth condition states that if the previous conditions do not apply, a transfer can go ahead. However, ‘amber flags’ might be raised requiring savers to seek advice before this can happen. 


Red and amber flags 

A ‘red flag’ is present where a saver refuses or fails to respond to a request for information relating to a transfer or they are unable to evidence that they have sought the necessary advice. 

If a person or firm without regulatory approval gives a saver advice in relation to a transfer or the transfer has been recommended outside of formal advice, this will also be a ‘red flag’. 

Where a saver has been offered an incentive to transfer, is being pressured to transfer quickly or is transferring following unsolicited contact from a third party, this will be deemed a ‘reg flag’. 

‘Amber flags’ will be raised if the scheme the pension is being transferred to includes high risks or unregulated investments. A transfer will also be of concern if the transfer scheme is charging unclear or high fees. 

If the investment structure of a scheme is not clear, complex, or uncommon then this will be an ‘amber flag’. 

If the scheme being transferred to includes overseas investments or an overseas adviser has advised the saver, the transfer may be paused. Additionally, alarms may be raised if providers notice a high number of requests to transfer to a particular scheme or identify that the transfers involve a single adviser or firm. 


Extra layer of protection 

Tom Selby, head of retirement policy at AJ Bell, said: “New rules coming into force today provide savers with an extra layer of protection from the scourge of pension scams. If applied proportionately, they will hand more power to providers in blocking suspicious transfers while allowing the vast majority of legitimate transfers to go through as normal. 

“The point of the new rules is to give providers more power to stop – or at least stall – transfers where their due diligence raises legitimate concerns.” 

Dale Critchley, workplace pension policy manager at Aviva, added: “The new measures build on best practice already carried out by pension providers and will raise the bar in combatting scams across the industry.  

“Importantly they give providers and scheme trustees the power to say no to a pension transfer when their objective assessment tells them it is likely to be a scam. This is a positive step in helping to protect people from fraudsters.” 

Critchley added: “This doesn’t mean that individuals don’t have to be vigilant. Scams supported by bogus web sites can appear genuine, but the same rules of thumb apply – be cautious of investments promising large returns, unsolicited contact (particularly through social media), and being pressured to make a decision.” 


How to spot a scam 

The Pensions Regulator advises that savers remain vigilant towards potential pension scams with the following advice: 

-Reject unexpected offers out of the blue, particularly from companies you have not heard from 

-Check who you are dealing with to see if the firm has been regulated by the Financial Conduct Authority 

-Don’t be rushed or pressured; keep an eye out for limited time offers or claims of being able to access pensions before the age of 55 without mention of the HMRC tax bill 

-Get impartial information and advice from MoneyHelper, Pension Wise or a financial adviser