In HMRC’s latest Pension Schemes Newsletter published at the end of February 2020, it was noted that the Pensions Regulator has published a new scheme transfer checklist, for use by pension schemes if their members request a transfer.
The checklist, which was published in conjunction with the FCA, sets out a list of questions that schemes should ask themselves before agreeing to transfer a member’s pension. Answering ‘yes’ one or more of the questions may indicate a cause for concern. Examples of such warning signs could include:
- the receiving scheme is newly registered with HMRC;
- the receiving scheme is sponsored by a dormant employer;
- the receiving scheme or the receiving sponsoring employer is geographically distant from the individual;
- the individual has been contacted out of the blue, or is being advised by a non-regulated adviser;
- the individual is being put under pressure to complete the transfer quickly (for example, being asked to return documents by courier); and
- the individual has received unrealistic promises of high returns, large lump sums, or the ability to access their pension before age 55.
Ultimately, the decision of whether or not to grant a transfer to a member is a decision for the scheme trustees. If a member makes their transfer request in accordance with statutory requirements, they will have a statutory right to transfer, which means that the transfer must be progressed and completed by the trustee within certain timescales. However, as trustees are also obliged to act in the best interests of their members, they will be anxious not to transfer money to a bogus scheme.
The Pensions Ombudsman has heard several cases relating to transfers which have emerged to be to fraudulent schemes. Where a transfer was found to be a scam and it was thought that the trustees of the transferring scheme did not do enough investigation in to the receiving scheme to prevent it, remedies have included reinstatement of the member’s benefits in the transferring scheme (which clearly could be a huge cost depending on the size of the member’s pot). Additionally, there could be reputational issues for the scheme or the employer, as well as distress for the member.
On the other hand, if a valid transfer request is denied by trustees or not carried out within the statutory time limit, the trustees may be subject to fines or complaints.
Please speak to your normal Norton Rose Fulbright pensions contact if you would like further information on the obligations on trustees regarding transfer requests or potential scams.