The government is aiming to increase protections for pension savers with new plans to stay ahead of increasingly sophisticated fraudsters who rob people of their lifetime savings.
Proposals announced this week will introduce a new ‘warning flag’ for transfers to small self-administered schemes (SSASs), where there is no clear link between a saver and the scheme to which they are transferring. This will enable the transfer to be halted while further checks are carried out.
The consultation also seeks views on reducing the administrative burden that can delay legitimate transfers, helping to streamline the process for savers who are not at risk of pension fraud.
“The targeted safeguard proposed is an important step forward in protecting savers. We urge trustees and administrators to have their say.”
Gaucho Rasmussen, The Pensions Regulator
Torsten Bell, minister for pensions, said: “Pension scams can rip away not just people’s savings, but the retirement they are looking forward to. This government is determined to stay one step ahead of criminals who seek to exploit savers.
“Too often we see fraudsters trying to trick workers into transferring their savings into bogus pensions. We are stepping in to automatically block transfers where the warning signs are flashing red.”
SSAS action an ‘important step’
The consultation is the first step in a wider government programme to tackle pension fraud. Government departments will work with industry stakeholders, including the Pension Scams Action Group (PSAG). Further measures, including potential new legislation, are being developed this year, the government said.
Gaucho Rasmussen, executive director of enforcement and executive general counsel at the Pensions Regulator (TPR), said: “Fraud wrecks lives and tackling it demands strong, coordinated action. Through the Pension Scams Action Group, which TPR leads, we are working closely with the DWP, law enforcement, the pensions industry and other partners to identify emerging threats and stop fraudsters in their tracks.
“The targeted safeguard proposed is an important step forward in protecting savers. We urge trustees and administrators to have their say.”
“The red and amber flag framework was introduced with the right objective [but] it has often been applied too broadly, leading to unnecessary delays for legitimate transfers.”
Andrew Tully, Nucleus
Christian Macnab, partner at LCP, said the measures “should allow more straightforward transfers to proceed” without unnecessary checks.
However, he added that successful implementation would require “clear, practical guidance on what ‘reputable’ [scheme] means in practice”.
Andrew Tully, technical director at Nucleus, said: “The red and amber flag framework was introduced with the right objective – protecting savers from pension scams. However, in practice, it has often been applied too broadly, leading to unnecessary delays for legitimate transfers.
“For example, transfers have been flagged due to ‘overseas investments’ even where individuals are simply investing in mainstream portfolios containing global equities – or, in some cases, where they simply had the option to invest overseas rather than any intention to do so. This triggered a requirement for members to engage with the Money and Pensions Service, adding time, complexity, and friction to otherwise straightforward transactions.
“In these instances, the rules have gone beyond their original policy intent, creating poor customer outcomes. It is therefore a welcome and pragmatic step that the government is proposing changes to ensure the system is more proportionate and better targeted.”
