21 June 2023
If you are covering the Department for Work and Pensions’ review of the pension transfer regulations, please see the following comment from Jamie Clark, pensions specialist at Quilter:
“The DWP has delivered its long awaited review of the pension transfer regulations that were introduced in November 2021 and it is something of a damp squib. These regulations empowered pension schemes to raise red and amber flags where they saw risk of consumer harm, and in particular scams. While helpful, the broad way in which some of the regulations were worded have resulted in some transfers being needlessly delayed or halted where they pose no risk to the consumer and today’s review does little to iron out the issues.
“A particular problem has been the wording around overseas investments which intends to flag unregulated and potentially fraudulent investments, but instead catches many kinds of legitimate investments in overseas markets. Today’s data confirms that ‘Overseas investments are included in the scheme’ is the most common amber flag, accounting for more than half of all amber flags raised. The review recognises this is causing delays but stops short of making changes.
“The DWP should make it an explicit legislative requirement for all pension schemes to provide clear and accurate information to customers on the reason an amber flag has been raised. The data shows that the reason for 43% of amber flags is ‘unknown to the attendee’ when consumers attended a Money and Pension Advice Service appointment. This amounts to ineffective data collection which leaves a real gap in understanding of how effective the rules have been. This gap also highlights the potential for increased consumer disengagement and frustration if they are not clear on the reason as to why their pension transfer has been delayed. Putting the onus on pension schemes to provide clarity could significantly improve this.
“These rules are necessary and welcome, but the failure of the review to address these points of unnecessary friction is disappointing. In particular, there is a clear divergence between policy intention and the practical application of the law when it comes to the overseas investments wording and this needs to be amended as consumers are needlessly suffering delays.”
