There has been a joint statement from DWP and TPR today following Pension Bee’s protest that some providers were hiding behind anti-scam regulations rather than pay transfers from their schemes in a timely way.
You can read the statement here
Edited highlight
Most pension transfers are legitimate and can proceed with minimum intervention. The legislation should have no impact on the process for transfers that, prior to the introduction of the regulations, would have caused no concern.
The Pensions Regulator has issued some updated guidance:
You can read the updated guidance here
Edited highlights
Red flag 5: The member has been offered an incentive to make the transfer. You may decide that this flag is present if the member was incentivised to make the transfer. The regulations provide examples of what is and is not an “incentive” for the purpose of the regulations. These examples are non-exhaustive lists, and where a particular incentive is not included in either of these lists, we expect trustees to assess whether the type of incentive offered is one which indicates there is a heightened risk that the transfer might lead to a member being scammed.
As the examples are not exhaustive, it is important that you keep up to date with current and evolving scam tactics and consider industry good practice. You may be faced with other examples of incentives being offered. Some could be considered normal industry practices.
After carrying out due diligence you may consider the transfer is at a low risk of a scam and, where your scheme rules allow, you may consider granting a discretionary transfer.
Amber flag 6: Overseas investments are included in the scheme The specific concern here is not whether the investment is in, for example, a global equity fund but whether the investment is in assets or funds where there is a lax, or non-existent, regulatory environment or in jurisdictions which allow opaque corporate structures.
After carrying out due diligence you may consider the transfer is at a low risk of a scam and, where your scheme rules allow, you may consider granting a discretionary transfer.
Some overseas advisers recommend members invest their pension funds in an offshore investment bond in an international self-invested personal pension. The FCA has warned that this may expose members to high or unnecessary charges and has stated that the tax benefits of such arrangements are redundant for a member investing in a UK personal pension.
A return to common sense
A group of lawyers determined that Pension Bee’s “refer a friend” promotion was an incentive. Doubt was cast by MaPs that the Pension Bee Global Equity Funds administered by State Street . LGIM and BlackRock might be falling foul of the overseas investment rules.
This guidance makes it clear that some incentives are normal industry practice. The Pension Bee incentive falls into this category as is made clear in this morning’s blog.
This link takes you to the 40 best refer a friend schemes around – sounds like normal industry practice to me.
This guidance makes it clear that Pension Bee clients should not have been sent to MaPs for guidance after selecting a global equity fund.
The guidance makes it clear that trustees should use common sense to determine the difference between a scam and a legitimate transfer and not hide behind legal niceties to protect themselves from imagined jeopardy.
It is good to see that the DWP and tPR can act quickly and decisively when called upon to do so in the public interest. We should be grateful to Pensions Bee for disrupting the nonsensical advice being given to trustees and those trustees’ supine acceptance of it.
Once again Chicken Lickin’ has been discovered and outed.
Hi Henry it is highly unlikely that anyone in Maps would ever express a view about a specific fund. Maps don’t even know what the Amber flags are given for until the customer tells us. The DWP framed the legislation not Maps. Maps deliver the appointment content neutrally. No.opinion about whether a fund does or doesn’t represent a potential scam is given. It would appear that it is the legal advice given by lawyers to trustees and administrators that dictates whether or not they raise red or Amber flags.
From the Times (see previous blog)
Dyke, who works in technology, changed jobs at the start of the year and in February requested that his pension pot with XPS, which he had built up over two years, be transferred to his personal pension. After a month passed without hearing anything, Dyke chased XPS. He was told that he needed a phone interview with someone from the government’s MoneyHelper financial guidance scheme, but that the next available slot was in April. He had to get guidance because an “amber flag” had been raised over the transfer, meaning a potential scam was detected….
During his guidance call Dyke was asked why he was moving his pension and where to. He was also asked if he had been given assurances that his new plan would not have offshore investments….
“Most of the questions they could have answered for themselves. They kept repeating stuff in a similar way and some questions were quite leading,” Dyke said.
“I understand the need to protect against scams, but surely XPS can look up PensionBee and see that it is an accredited provider.”
Dyke waited about three weeks before chasing XPS again. He was told that MoneyHelper hadn’t been fully convinced he wasn’t being scammed, and that he needed another interview.
Dyke’s main pension pot is invested in shares and bonds from around the world, like most investors. He thinks that confusion over these global investments must have been the cause of the amber flag, but is frustrated at the delay because PensionBee “doesn’t even offer any of the ‘offshore investments’ that you would be concerned about”.
Dyke has complained to his previous employer, made a complaint against XPS Pensions, and is considering going to the Financial Ombudsman Service, a resolution service for complaints against finance firms. He said: “It seems like at every stage they have made it really hard for me to leave their plan. They have £30,000 of my money, and I want it invested how I want.”
It seems to me that someone was concerned about “overseas investments” – even though Pension Bee’s are in global equity funds run by BlackRock, L&G and State Street.
The way the article reads it seems to me the customer confused the provider/administrator XPS with MoneyHelper …
‘During his guidance call … “Most of the questions they could have answered … They kept repeating stuff … ” “… surely XPS can look up PensionBee….” ‘
The fundamental problem is the legislation is badly worded.
Guidance doesn’t override law and the Trustees must try to follow the law. So whilst some brave Trustees will ignore the flags and proceed they risk a) future legal challenge if DWP/TPR change their minds, again, b) getting the blame for any future problem (even normal investment losses) => disgruntled customer “you shouldn’t have let me transfer” => legal damages claim c) TPO intervention “you didn’t follow the law or best prudent practice” d) reputational damage “They’re well dodgy, they broke the law to let me transfer” e) indemnity insurance issues as they are going against legal advice f) HMRC fines and penalties if it’s deemed an unauthorised payment (and remember QROPS status can be removed with retrospective effect) and probably some other risks I haven’t thought of. And all avoidable by actually doing what the law says!
I fear that what DWP/TPR have done is fan the scammers flames as the scammers now have ammunition to say “Government is saying they can, so the trustees are lying when they say the law forces them to do what they’re doing. They’re just stalling to keep you from getting your money”.