Home Business NewsBusiness New pensions anti-scam rules come into force today

New pensions anti-scam rules come into force today

by LLB Reporter
30th Nov 21 10:58 am

New rules designed to better protect people from pension scams come into force today (30 November 2021).

Providers now have more power to block pension transfers outright where scam ‘red flags’ are raised.

Furthermore, where ‘amber flags’ point to potentially suspicious activity, savers will need to take guidance from Pension Wise before transferring.

The Government has set out in very broad terms when these amber flags could be raised – but providers will need to use common sense when interpreting the rules.

Overzealous blocking of legitimate pension transfers could cause consumer harm and lead to a barrage of Ombudsman complaints.

Tom Selby, head of retirement policy at AJ Bell, comments: “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 one lingering concern is the extent to which all providers will apply common sense when interpreting the rules – specifically around the so-called ‘amber flag’ warnings.

“Where an amber flag warning is raised, this indicates the provider believes the scheme the member wants to move their retirement pot to may be a scam. The member will then be required to obtain guidance from Pension Wise before transferring.

“Anyone who goes through this process will have their transfer slowed down significantly, which is why the Government has avoided being overly specific when setting out when an amber flag should be raised.

“For example, the amber flag rules say overseas investments could be indicators of a scam. However, the fact virtually all defined contribution schemes allow overseas investments which aren’t linked to scams obviously means this shouldn’t in-and-of itself cause providers to insist transferring members must seek Pension Wise guidance before proceeding.

“It would be ludicrous in the extreme to force every person who transfers and intends to invest their retirement pot in a non-UK company like Amazon or Tesla to take anti-scam guidance before doing so.

“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.”

Overzealous transfer blockers risk complaints

“The Government has been crystal clear that it expects providers to use their common sense when implementing its anti-scam rules.

“Despite this, there have been some suggestions pension schemes might take an overzealous approach to amber flag warnings because they are risk averse.

“Anyone going down this road leaves themselves open to complaints to the Ombudsman.

“While protecting members from scams is extremely important, people making legitimate transfers will not stand for unjustified delays.”

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