PensionBee, has written to Guy Opperman MP, Minister for Pensions and Financial Inclusion, to alert him of a handful of providers in the pensions industry, who appear to be abusing the latest pension legislation to block and delay consumers from moving their own pensions.
The Department for Work and Pensions established new legislation in 2021 entitled ‘The Occupational and Personal Pension Schemes ( Conditions for Transfers) Regulations’[1], which enables providers to flag transfers where the risk of a scam is too high, blocking on the basis of listed criteria.
However, contrary to efforts to make the pensions industry safer, these regulations appear to have been misused in a variety of inventive ways. These include adding new obstructive steps to the transfer process in order to freeze legitimate transfers.
Providers reported to the Department for Work and Pensions include The People’s Pension, Creative Pensions Trust, HS Admin, Cushon, Workers Pension Trust, XPS and Railpen.
Consumers have been presented with various reasons for transfer delays, including concerns about international investments (with some consumers noting that investments in US indices, such as the S&P 500, may be triggering the delays) and routine rewards of a modest monetary value.
These latest obstructions come at a time when savers have already seen an overall 45% increase in pension transfer times since 2018[2]. This is despite recent Financial Ombudsman Service rulings, such as DRN3024818, upholding complaints about transfers that take more than 10 days[3].
Romi Savova, CEO of PensionBee, commented:
“It’s appalling to see pension schemes abuse regulations to prevent savers from moving their retirement savings to their provider of choice.
This type of behaviour is unacceptable for any institution, but particularly for companies that have been entrusted with savers’ hard-earned pension savings. Providers cannot hide behind new legislation to justify the disappointing rise in pension transfer times and must remember the impact their decisions have on the consumers they are meant to serve.
It is time for regulators to take pension transfer times seriously and introduce a 10-day pension switch guarantee, a time frame the Ombudsman is independently enforcing.”
Pension Bee have a history of naming and shaming. This blog supports the 10 day turnaround rule.
[1] The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021, GovUK
[2] Average pension transfer times increase by 45% in just four years, PensionBee
It is frustrating for us, the IFAs, but you cannot have it both ways!
If you want to protect these people, you need to do something about that. So you need to ask a questionnaire, and wait for the answers. Someone has to look at those answers, and when some answers raise a “flag”, ask more questions.
At least for advised clients, we learned how to avoid raising a “flag”. However, for DIY clients the questions are written in such a way, that most likely will raise a flag, and a referral to MoneyWise or what its name is now! For firms like PensionBee this could be a deal breaker, some people changing their mind, instead of attending the MoneyWise session etc.
I dare say PensionBee might be unfair here, if not downright disingenuous. All pension administrators and providers are bound to comply with the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 (SI 2021/1237) (“the Regulations”). It is my understanding that PensionBee offers a “£25 contribution on signing up”.
Any “incentive” can trigger the red flag in Regulation 8(5)(c) and (6):
Regulation 8
“(5) There is a red flag present where the trustees or managers of the transferring scheme decide that –
…
(c) the member has been offered an incentive to make the transfer
(6) In this regulation –
…
“incentive” –
(a) includes an offer of one or more free pension reviews, access to some or all of the member’s pension savings before they attain normal minimum pension age, a savings advance or cashback from their pension savings; and
(b) does not include an incentive to make the transfer offered by the trustees or managers of the transferring scheme, or by the member’s employer where that employer is a sponsoring employer of the transferring scheme, whether that incentive is provided directly by the trustees, managers or sponsoring employer, or by a person they have authorised to provide it”
The Regulations capture any incentive offered to the member. In my view, an offer of £25 is an incentive, which raises a red flag and prevents a statutory transfer, in accordance with Regulation 5(3)(b). A provider which blocks a transfer for this reason is not “obstructing” the transfer request in some perverse way; they are acting in compliance with the Regulations as written.
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