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Preparing your transfer procedures in light of the proposed scams regulations
8 October 2021

Preparing your transfer procedures in light of the proposed scams regulations

Insight Partner

The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 (the Regulations) are expected to come into force in ‘early autumn’. Aiming to better protect members from scams by introducing new conditions restricting statutory rights to transfer, the changes mean that schemes need to revisit their existing processes.

The new conditions

The subject of much industry discussion, current transfer legislation gives trustees little scope to refuse to transfer a member’s benefits. To strike a balance between better protecting savers and continuing to give them the right to exercise choice, the Regulations ask that, in short, one of four new conditions is met before a member’s request is allowed:

  1. The proposed transfer is to a scheme presenting a low risk (this includes public service schemes, authorised Master Trusts and collective money purchase schemes, and Financial Conduct Authority (FCA) authorised personal pension schemes)
  2. If not transferring to a ‘low risk’ scheme, the member will need to provide evidence of an employment link between themselves and the receiving scheme
  3. Where the member wishes to transfer to a qualifying recognised overseas pension scheme (QROPS) and cannot show an employment link, they must demonstrate at least six months residency in the scheme’s financial jurisdiction
  4. Where none of the first three conditions have been met, schemes will need to assess whether any ‘warning flags’ are present. If not, the transfer can proceed. Trustees and managers will have the power to request information to assess the circumstances of the transfer. A red flag will prevent the transfer going ahead; an amber one allows the transfer to proceed if the member provides evidence of having taken approved scams guidance or of making a transfer to that scheme in the last 12 months.
Changes to processes

We hope that some changes may still be made to the draft Regulations and have submitted a response to the consultation setting out our recommendations, but in the meantime, the clock is ticking. Schemes should review their transfer processes and take advice as to what changes may be necessary. The following areas will be key:

  • Due diligence - existing due diligence processes may need to be enhanced or revised. The Department of Work and Pensions (DWP) has developed a set of standard questions for schemes to use, with the aim of keeping due diligence proportionate. However, these join an array of legal requirements and industry guidance including the Pension Scams Industry Group’s (PSIG’s) Code, and the Pensions Administration Standards Association’s (PASA’s) defined benefit transfer guidance. Trustees and managers will need to have clear and workable processes in place that take on board all these elements
  • Timeframes -meeting the new conditions will introduce additional hurdles to a process already littered with obstacles. Transfers will likely take longer, with the new evidential requirements potentially causing delay within the existing six-month statutory time limit. Schemes should be alert to this, and consider how to run their transfer processes to time
  • Additional stakeholder involvement - with enhanced due diligence and the need to weigh factors when considering warning flags, a practical consequence will be the need for greater input on transfers from trustees, administrators and legal advisors.

Schemes should familiarise themselves with the final regulations as soon as released to ensure they are well prepared for their coming into force. Employers:


This article was featured in Pensions Aspects magazine October edition.

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Last update: 14 October 2021

Tony Hewit
Tony Hewit

Pensions & Benefits In-house Specialist, Global

Salary: £50000 pa

Location: Mix of Office (London or Birmingham, 1-day only) and Home

Pensions Manager

Salary: £50000 - £80000 pa

Location: London (Stratford)

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