“Put out more flags” – trustees’ new duties to protect the scammed.

Today, November 30th 2021, is the first on which trustees of occupational schemes will be required to throw red and orange flags at members requesting to transfer their scheme benefits into another arrangement of dubious value.

The government response to the Pension Scams consultation set out 3 potential interventions aimed at tackling different aspects of pension scams:

  • ban pensions cold calling
  • make it harder for fraudsters to open pension schemes
  • limit the statutory right to transfer to some occupational pension schemes

The first 2 commitments were delivered in 2019; the regulations this consultation relates to will deliver on the final commitment. The Government  claim that this will build a strong first line of defense in the fight against pension fraud, providing trustees and scheme managers with tools to intervene when concerns about a transfer arise.

I agree that it will. But it is a sad day for pensions when we have to take this action. We should be asking “why is there an opportunity for scams . The answer is obvious, where there is a statutory right to transfer and where the option to remain is not valued, there is an opportunity for a crook.


So what is being proposed?

The new measures will enable trustees to prevent a transfer request if they decide that ‘red flags’ are present, the circumstances most commonly associated with scams. The statutory right to a transfer will be removed in these cases. In other circumstances, ‘amber flags’, which may be an indicator of a potential scam, the member will have to provide evidence they have taken scam specific guidance from MaPS before their statutory right to a transfer can be exercised.

These measures have been consulted on and you can read the details of when each type of flag should be thrown (as well as the DWP’s rationale)  here .


What will this mean?

The DWP estimate that around of 5% of potential transfers will be flagged. Since consolidation is part of the wider agenda of the Government, this is still a high figure.

Consolidation of small pots is needed to ensure people can drawdown their pensions efficiently at retirement. This is especially the case where the size and source of the pots means that someone can’t properly exercise their retirement options without transferring.

There is a danger that we start seeing the transferring of small pots to bigger pots as a dubious activity. It is not. It is the right thing for people to be doing and 95% of the time, they will be left to get on with it.

There will undoubtedly be red flags thrown which shouldn’t have been and there will be some transfers that still get through to scammers, but we have to live with the rules now they are in force with the comfort that “better safe than sorry”. The flag-throwing will be reviewed in May 2023, by which time we will be in a different world, with pension dashboards looking more of a reality.

This flag throwing is ugly but necessary. It is a messy set of measures that have been put in place because there are fundamental problems with the way in which the pension system works. The Government initiatives in place to make that system better are taking a long time to materialize and this is – to my mind – a stop gap solution to a problem that will only be solved when we restore confidence in the pension system.

It is good none the less, that we have this additional protection. Nobody really knows the extent of scamming, nor will we for many years. Many people may have been scammed but have yet to have discover it, some people are scammed and are either too frightened or ashamed to report it. And many scams are “fractional”, reducing your savings over time because of ridiculous charges.

The trustees of occupational schemes have there work cut out for them, and these measures will add to the burden of regulation they are facing. Ironically , this is likely to be a further burden that may lead to bulk consolidation.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to “Put out more flags” – trustees’ new duties to protect the scammed.

  1. bobward5 says:

    The road has been long and arduous and whilst a very welcome improvement, it is tainted by the length of time since 2012 taken to tighten-up slack areas of regulation and administration (like the period of no screening and blanket registration, no questions asked, when creating occupational schemes).

    In addition, Rules have existed all along for Trustees and Administrators to ensure all members’ funds are secure and I believe that obligation extended to greater assurances over the destination of funds being transferred, prior to release. Too few questions were asked, too little diligence applied, sitting back and quoting the statutory right, created an open season for seven or eight years during which time peoples’ lives have been ruined and lost.

    I fear even now the speed with which fraudsters move will not be matched by a process of alerting and sharing information across the industry due to fears over and hiding behind data protection issues and what has been the case in some areas, in the attitude of once a transfer has been completed and the member has signed the Trustees’ disclaimer, “it someone else’s problem”. Thanks to the efforts of the Pensions Ombudsman that hole has been plugged in a number of cases.

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