The DWP has now finalised its new rules about statutory pensions transfers. The new rules place statutory obligations on trustees to examine most transfers in greater detail and give trustees significantly greater scope to say no to a member request to transfer their pension to another pension scheme. This is if they decide that certain scam indicators are present – so-called “red and amber flags”.
Under the new rules, if trustees identify any of the DWP’s red flags – the clearest warning signs for a scam – they will have to reject the transfer. If they spot amber flags – possible indicators for a scam – members can still transfer if they take scams guidance from the Money and Pensions Service (MaPS) first.
These new rules are due to come into force from November 30, 2021, for any transfer initiated on or after that date.
If trustees are not already in touch with their administrators about this, we would recommend contacting them as a priority to discuss updating the scheme’s transfer processes and documentation to comply with the new requirements.
For many transfers initiated after November 30, 2021, trustees will have to make a judgment call about whether or not to block a transfer or at least refer members to MaPS. This does mean that schemes will be more exposed to claims from members – both if a transfer goes ahead to a scam scheme and, conversely, if a blocked transfer results in investment losses.
Transfers already underway, or initiated between now and November 29, 2021, will not come under the new rules. However, as an immediate step, it may be sensible if trustees have cases which are causing concern to strengthen the wording of any member communications or discharge forms to acknowledge the new regime.
Of course if we can help with any of this, please do get in touch. We will be issuing a more detailed briefing on this later this month.
