Concerns of ‘capacity crunch’ at Maps as scam rules come into force

A recent parliamentary answer from pensions minister Guy Opperman has raised concerns in the industry about whether the government has the capacity to handle an increase in queries, on the back of new rules designed to protect people who transfer their pensions from scammers.

From the end of November trustees will be able to pause or block pension transfers if they deem necessary, by raising a ‘red flag’.

In addition, they can raise an ‘amber flag’ if they suspect a potential scam, which will mean the member will have to provide evidence they have taken specific scam guidance from the Money and Pensions Service’s MoneyHelper before they are allowed to transfer.

Wendy Chamberlain MP asked what estimate the DWP had made on the number of referrals to MoneyHelper for mandatory guidance once the new rules come into force, and whether additional resources have been allocated to the organisation to account for this.

In his answer, submitted on November 16, Opperman said accurate data on this will be available after November 30 when the rules come into force.

He said: “It is the department’s intention to monitor the volumes of referrals to MoneyHelper and include this in the review of the regulations I have committed to carry out within 18 months of them coming into force, having worked closely with the Money and Pensions Service.”

But Chamberlain said this offered “little reassurance” that preparations have been made by the government.

She said: “A review in 18 months will be of little use if people struggle to transfer their money now because they cannot access an anti-scam interview because of a capacity crunch.”

Daniel Jacobson, a senior consultant at LCP, said it was unclear how trustees will respond to the rules. For example, if they opt for an ultra-cautious approach of categorising large numbers of transfers as raising amber flags, there is a risk that MoneyHelper could be overwhelmed, leading to delays.

Jacobson added: “The new rules have been brought forward with the best of intentions, but there has been very little time for schemes to prepare, and volumes of referrals to the new anti-scam interviews are highly uncertain.  

“Unless schemes apply appropriate due diligence, rather than simply deciding to automatically refer most cases to MoneyHelper, there is a risk that large volumes of referrals could overwhelm the service and lead to delays and frustration.  

“While trustees and administrators should not view referring a case to MoneyHelper as the default course of action, the government must also ensure that there is capacity in place to ensure that those genuine referrals can be dealt with swiftly and efficiently and that it doesn’t become a bottleneck.”

This article originally appeared on FTAdviser.com