Five members of parliament, including the chair of the Work and Pensions Committee, Stephen Timms, have tabled an amendment to the pension schemes bill designed to pressure pensions minister Guy Opperman into clarifying the government’s position on pension scams.
The amendment, originally proposed by the Pension Scams Industry Group, is the latest move by parliamentarians to insert into the bill a provision that would alter the statutory right to a transfer where certain “red flags” were identified, a measure proponents argue is essential to combat pension scams and fraud.
I want to use the further debate on Monday to pin down what they are likely to say, and in particular to ensure they don’t include exemptions that would allow space for large-scale scams to continue
Stephen Timms, Work and Pensions Committee
The proposal enjoys cross-party support, having been sponsored by Mr Timms, Neil Coyle and Steve McCabe of Labour, and Conservative MPs Desmond Swayne and Nigel Mills.
In a letter to Mr Timms last month, Mr Opperman had argued that clause 125 of the bill unamended has sufficient breadth to allow the government to act against the threat of scams.
The minister went further earlier this month, telling a meeting of the House of Commons Public Bill Committee on November 5 that the government intends to enact a set of regulations after the passage of the pension schemes bill that will “significantly and realistically prevent future scams”.
These will include setting out conditions — applicable both to defined benefit and defined contribution schemes — where trustees may refuse a transfer, for instance where the destination of the transfer lacks the proper authorisation, or where the member has not supplied evidence of employment or residency.
“Those conditions can also include other red flags, such as who else is involved in a transfer. If those red flags are apparent, the regulations will enable the trustees to refuse to transfer,” Mr Opperman said.
Clarity under pressure
While the minister’s promise of anti-scam regulations to follow the implementation of the pension schemes bill have broadly been welcomed, proponents of the amendment, which will be debated on November 16, intend to use it to force clarity on what those future regulations will look like.
Mr Timms told Pensions Expert: “The minister’s assurances to date in response to my amendments have been very encouraging. It’s not that they have been insufficient, but — for obvious reasons — we haven’t yet seen the regulations that he is proposing.
“I want to use the further debate on Monday to pin down what they are likely to say, and in particular, as touched on in the committee stage debate, to ensure that they don’t include exemptions that would allow space for large-scale scams to continue,” he added.
PSIG chair Margaret Snowdon said the amendment is intended “as a clear way to signal the importance of due diligence by schemes and providers in preventing pension scams”.
“The amendment to clause 125 will give legal backing to the use of red flags discovered through due diligence to restrict the statutory right to transfer. This would be in addition to the currently planned restrictions covering employment links,” she said.
The PSIG is working with the Department for Work and Pensions to define the red flags, Ms Snowdon continued, “which will be set out in regulations and thereby easier to adapt to meet changing scam tactics”.
Because only 5 per cent of transfers show signs of scam activity, the right to transfer will “only be restricted in a minority of cases, but a big enough number to prevent the devastating losses currently suffered”, she added.
Separately, Pensions Expert understands that, though the amendment as written is considered worthy of inclusion in the bill, its inclusion is not deemed essential by all of its proponents. A sufficiently clear assurance by the minister at the debate on Monday may be enough to placate at least some of the amendment’s supporters.
Time is of the essence
Jack Dromey, shadow minister for pensions, told Pensions Expert: “Millions of workers are under mounting financial pressure and are increasingly vulnerable to pension scammers preying on that fear, often resulting in catastrophic consequences.
“We strongly urge the government to support proposals to better protect people from risky transfers and improve the provision of advice to stop people falling prey to scammers.”
LCP partner Steve Webb cautioned that “this must be addressed as a matter of urgency”.
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He argued that previous anti-fraud measures, such as a ban on cold-calling, took far too long to implement.
“If the DWP agrees that action is needed, it is needed now, not sometime a few years down the track after a long period of consultation,” Sir Steve told Pensions Expert.
“The minister needs to be pressed to give a firm timetable for action and implementation of new safeguards.”
