The Pensions Bill announced today (October 14) in the Queen’s Speech is set to introduce additional pension transfer rules to prevent scams, as first announced in 2017.
A background briefing document to the speech detailed regulations that will define the circumstances under which a pension scheme member will have the right to transfer their savings to another scheme.
This will apply to both defined benefit and defined contributions schemes.
The government pointed to estimates from the The Pensions Regulator that there were 100,000 pension switching transactions in 2017/18.
“This indicates the volumes of transfers that could potentially be at risk of being scammed, and why the transfer measure in the Bill is so important,” the document stated.
In 2017, the consultation which introduced the cold-calling ban – in place since January this year – also included new rules on limiting the statutory right to transfer.
These were aimed at preventing fraud in pensions and included tougher action to help prevent the transfer of money from legitimate pension schemes into fraudulent ones.
The proposed rules require trustees to check their receiving scheme is regulated by the Financial Conduct Authority, or has an active employment link with the individual, or is an authorised master trust.
However, when the government published its response to the consultation in August 2017 it stated that it would legislate in this area following the roll-out of the master trust authorisation regime, which is set to complete this year.
Tom Selby, senior analyst at AJ Bell, noted the “government’s response to the rise of pension scams has been welcome but far too slow, leaving millions of people at greater risk of falling victim to fraudsters”.
He added: “This latest intervention, if it becomes law, was first proposed in 2017 and should strengthen the ability of pension providers to refuse a transfer where there is evidence the scheme someone is moving to is being used to facilitate scam activity.
“Previously there has been a real tension between the right of savers to move their money to a different scheme, which is clearly very important, and the responsibilities on providers in blocking transfers to suspect schemes.
“Addressing this tension will help ensure fewer people fall victim to pensions fraud.”
The new rules for transfers are expected to prevent an outcome such as the one seen in the Royal London case from 2016, where a High Court judge ruled in favour of a clients’ right to transfer her pension into a new scheme despite her existing provider’s concerns about it.
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