Trustees get power to block 'red flag' scam transfers

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Trustees get power to block 'red flag' scam transfers

Enhanced powers for trustees to block or pause transfers where there is potential scam activity will come into force on 30 November, the government has confirmed.

In a bid to cut down on scam and fraudulent activity, the Department for Work and Pensions  has confirmed it will go ahead with "red" and "amber" flag proposals.

Outlined in a consultation earlier this year, a red flag would allow trustees and scheme managers to completely block a transfer request where there are "tell-tale signs of fraud or methods frequently used by scammers".

We are tackling the scourge of pension scams in practical terms to safeguard pensioners' hard-earned savings."

The amber flag would allow a transfer to be paused until a member has proven that they have taken scam-specific guidance from the Money and Pensions Service (Maps).

The regulations will come into force at the end of the month, but will be reviewed within 18 months to ensure they continue to be effective against scammer tactics.

Pensions and financial inclusion minister Guy Opperman (pictured) said: "We are tackling the scourge of pension scams in practical terms to safeguard pensioners' hard-earned savings. These measures will provide better protection for savers."

Tell-tale signs of scams can include "too good to be true" incentives such as free pension reviews, early access to pension cash, or time-limited offers, the government said.

The regulations were welcomed by both The Pensions Regulator (TPR) and The Pensions Ombudsman (TPO), who will work with the government, Maps and the Pension Scams Industry Group (PSIG) to protect pensioners and raise awareness around the dangers of scams.

TPR executive director of frontline regulation Nicola Parish said: "We are pleased these new rules enshrine in legislation two of the key parts of the pledge to combat pension scams - around due diligence measures and issuing members warnings of high-risk transfers.

"We urge all trustees and pension providers to take note of these new rules and continue to play their part in stopping scams. This includes reporting all suspected scams to Action Fraud, or by calling 101 in Scotland.

"The pension industry can continue to demonstrate its commitment to stopping the scourge of scammers by joining our pledge campaign."

Ombudsman Anthony Arter said: "Having witnessed the real damage that pension scams can inflict on an individual's retirement I welcome the new transfer regulations which look to make transfers safer.

"I am optimistic that over time statutory clarity regarding the level of due diligence expected of trustees and additional information and guidance to be given where appropriate to those planning to transfer, will help combat pension scams, and also reduce the number of transfer complaints to TPO.

"Complaints received after the regulations come into effect, will be investigated within the framework of those regulations (and industry guidance) on a case-by-case basis, having regard to the facts and evidence in each case."

Research from Quilter earlier this year revealed that just one in 700 scams resulted in a fraud conviction in 2019, having fallen 10% on average year-on-year since 2011.

PSIG chair Margaret Snowdon said: "We now urge the industry to apply the new conditions for the statutory right to transfer in order to safeguard members' benefits.

"Schemes that already carry out due diligence checks and maintain clean lists of transfers destinations should be well prepared for the new rules and the majority of transfers should proceed without delay - the purpose of the changes is to allow trustees to say no when faced with scam signs."

The group is now working on a revised version of its scam code, with an aim to publish this later in the year with practical help on how to use the rules.