Statutory pension transfer rights pause becomes bill amendment

The Pension Scams Industry Group has proposed an amendment to the pension schemes bill to give trustees the power to restrict the statutory right to transfer where there are suspicions of fraud, which is supported and set to be tabled by two MPs, according to its submission to the Work and Pensions Committee inquiry on pension scams.

The amendment comes as the Pensions Regulator told the same committee that it would like the power to allow trustees to delay transfers where scam activity is suspected.

Under current rules, if a provider refuses to carry out a transfer they could be at risk of legal action. In 2016, Royal London was successfully taken to court by a scheme member after it identified and blocked a suspicious transfer request.

“Some organisations believe that the statutory right to transfer is so strong that efforts to stop transfers are wasted,” PSIG stated in its submission.

More can be done to stop scammers in their tracks and make it easier for schemes and providers to help their members

Darren Philp, Smart Pension

According to PSIG’s submission, Labour MP Stephen Timms, chair of the WPC, and Conservative MP Nigel Mills, also a member of the committee, support the proposed legislative change and will table this amendment to the pension schemes bill, which returns to the House of Commons on Wednesday.

The voluntary body stated that the “focus on scams protection must be on preventing monies going to scams and not on recovery after the event”.

It added: “This means trustees and providers must be able to refuse a transfer where there are signs of a scam.

“In many cases (including transfers to self-invested personal pensions), because of the statutory right to transfer, only a legislative change will permit such refusal on suspicion of a scam.”

The Pensions Management Institute and the Association of British Insurers are also supportive of this change, according to their respective submissions to the inquiry.

Darren Philp, director of policy and communications at Smart Pension, also agrees with the proposal. “More can be done to stop scammers in their tracks and make it easier for schemes and providers to help their members,” he noted.

Besides suggesting that trustees and providers should be allowed to override the statutory duty to transfer when there are recognised signs of a scam, Mr Philp advised that such measures “would need to be regularly updated to keep up to date with the latest tactics of the scammers, but that could be achieved through secondary legislation”.

TPR calls for powers to grant trustees transfer extensions

In its response to the select committee inquiry, the regulator stated it would like to see a change in the regulations to help scheme trustees fighting pension transfer scams.

Currently, considering that legal requirements are met, trustees have a legal duty to carry out a transfer of savers’ cash equivalent transfer value within a six-month deadline.

The watchdog believes a “useful addition” to its regulatory toolkit would be the ability to grant trustees extensions to the statutory transfer time period where a scam is suspected.

“Such a measure could give TPR or other authorities a window to investigate, while giving trustees comfort that they would not face action from TPR or the possibility of an adverse determination from the Pensions Ombudsman,” the regulator stated.

TPR currently has discretion not to take enforcement action against late transfers, but this does not provide trustees with the same certainty, it added.

In August, the watchdog and the Financial Conduct Authority relaunched their scam awareness campaign, revealing that more than £30m has been lost to pension scams in the past three years alone.

Individual losses ranged from less than £1,000 to as much as £500,000, with the typical victim being a man in his fifties.

However, recent research from Quilter showed that just 7 per cent of reported pension scams were passed on for police investigationlast year.

In July, the WPC announced it would focus on scams in the first stage of its three-part inquiry into the impact of pension freedoms and the level of protection for pension savers.

Mr Timms has recently warned that changes in the law will be needed in order to tackle the growing pension fraud.

TPR asks for Project Bloom funding

One of the main initiatives to tackle pension scams is Project Bloom, which is chaired by TPR and has regulators, government agencies and other institutional bodies among its members.

However, the project is not established by statute. It functions on the basis of organisations working in partnership out of a shared interest in tackling pension scams and fraud, the regulator stated.

In its submission, the watchdog noted that the initiative “could do even more to combat scammers if it was given financial backing through either statutory funding or from an industry levy”.

“With its own funding, Bloom could improve the tasking and co-ordination of educational, prevention and enforcement activities between regulators, industry, police and criminal justice agencies,” it added.

The regulator’s vision would be to establish a pension scams ‘hub’, staffed by “officials on attachment from different agencies working alongside law enforcement and covered by appropriate information-sharing arrangements”.

TPR, which is currently carrying out seven criminal investigations into scams and fraud that cover 52 schemes with indicative losses to savers’ pensions of around £55m, is going to introduce new training for trustees in this area.

It will be launching a new scams module in its “trustee toolkit”, developed in collaboration with PSIG, later this year. The goal is to “encourage those working in the industry to continue to educate themselves on pension scams and evolving tactics”, and will also be recommended for administrators.