"At present, there is no distinction between overseas investments that present a scam risk as opposed to those that do not."
- Jon Greer, head of retirement policy at Quilter
Two and a half years on from the introduction of the pension transfer regulations, and almost a year following the Department from Work and Pensions’ review of its regulations, new freedom of information (FOI) data from the Money and Pensions Service (MaPS) gathered by wealth manager, Quilter, reveals major issues persist for pension savers.
Quilter says that although it is a positive that thousands of people have potentially been saved from fraudsters since the regulations were first implemented, "this has been overshadowed by the large number of pension transfers that have been halted unnecessarily".
The latest figures from MaPS reveal that more than 23,000 of the 28,118 amber flags raised over the past two and a half years were raised due to either an unknown reason or for a potentially low risk transfer relating to overseas investments.
Of the 28,118 MoneyHelper Pension Safeguarding Guidance (PSG) sessions conducted since the introduction of the pension transfer regulations, just under half (46% or 12,888) were conducted with an attendee who did not know the reason why an amber flag had been raised on their pension transfer. Meanwhile, more than a third (36% or 10,153) were conducted after a flag was raised on potentially low-risk transfers relating to overseas investments.
Despite the DWP’s acknowledgement that the regulation wording in relation to overseas investments was causing delays and issues for pension savers, Quilter says "it has taken no action to resolve the issue and those transferring their pensions have continued to face unnecessary delays as a result".
Since implementation, nearly 13,000 PSG sessions have been conducted with attendees who were not aware of the reason as to why the amber flag was raised, and therefore why they needed to attend the appointment.
Jon Greer, head of retirement policy at Quilter, said: “We are well into the third year of the pension transfer regulations, and while it is positive that many people will have been saved from fraud thanks to the protection provided, the same issues that were recognised within the first few months continue to persist even now.
“As the industry has repeatedly highlighted, there remain far too many unnecessary points of friction within the regulations which have greatly limited their effectiveness. Unfortunately, the lack of meaningful change from the DWP has resulted in a growing number of people being negatively impacted as their pension transfers have been stopped in their tracks for what is often no real reason.
“Earlier this year the DWP confirmed that work to consider whether the rules could be improved is ongoing, but it gave no indication of a timeline. Though it is good to hear that the DWP is making efforts to adjust its rules to eliminate the current issues, this arguably should have been done a year ago when it first published its review and could have made changes to prevent further disruption to pension savers.
“As a matter of urgency, the DWP must act to ensure that the divergence between policy intention and the practical application of the law when it comes to the overseas investments wording is ironed out as at present, there is no distinction between overseas investments that present a scam risk as opposed to those that do not.
“Additionally, our understanding of the effectiveness of the rules has been marred by the lack of clarity provided to customers as to why a flag has been raised, and consequently the data that MaPS is able to capture. Pension schemes must be required to provide accurate and clear information to customers and the DWP should consider making it an explicit legislative requirement to swiftly resolve this issue.
“Pension savers have suffered needless delays for years now, and only the DWPs action will be able to finally put a stop to it.”
