It is now approaching two years since we had new rules on pension transfers.
The transfer regulations that came into force on November 30 2021 changed the statutory right to transfer and were designed to make it easier for pension scheme trustees to stop transfers where they thought the member was at risk of a scam.
Since the regulations came in it has not all been plain sailing though, with overseas investments being a particularly contentious area.
The regulations state: “There is an amber flag present where the trustees or managers of the transferring scheme decide that…there are any overseas investments included in the receiving scheme”.
And an amber flag means the ceding provider should send the member off for a MoneyHelper appointment before allowing transfers to go ahead.
In the months following the new rules coming in, it is fair to say the demand for appointments was higher than had been planned for, and the wait for an appointment was around two months at times.
This prompted The Pension Regulator to update its guidance in July 2022 to make the policy intent clear, stating: “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.”
Given the DWP are currently reviewing the wording of the regulations, we can only hope this misalignment is temporary. What is interesting is that we have just had the first decision by the Pensions Ombudsman following a complainant suffering a loss in transfer value due to being referred to MoneyHelper and the subsequent delay that caused.
In the case concerned, the overseas investments were global funds run by a regulated UK-based fund manager authorised by the Financial Conduct Authority. The trustees of the ceding scheme had taken legal advice, and following this concluded these funds were overseas investments.
The ombudsman’s decision was therefore not to uphold the complaint as the trustees had acted reasonably in referring the complainant for a MoneyHelper safeguarding appointment.
As things currently stand, I do not think the ombudsman could have come to any other decision – by the letter of the law global funds are overseas investments.
However, it is worth noting the ombudsman in his ruling commented: “It appears the wording of the transfer regulations and intended practical application may not be aligned.”
Given the Department for Work and Pensions are currently reviewing the wording of the regulations, we can only hope this misalignment is temporary.
Of note in TPR’s guidance it states: “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.” So, although trustees can insist on referring to MoneyHelper, it does not mean they always should.
Although the Pensions Ombudsman has ruled trustees are within their rights to do so, I do wonder if a complaint ended up in the hands of the Financial Ombudsman Service instead, and the only overseas investments were such vanilla low-risk funds, whether insisting on a MoneyHelper appointment would meet the lower “fair and reasonable” threshold.
What is clear, is that it is not clear. We need the law to reflect policy intent, so trustees and scheme administrators take proportionate action and pension savers get the outcome they expect.
Lisa Webster is senior technical consultant at AJ Bell
