ScamsDec 11 2020

Red flag warnings causing huge delays on pension transactions

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Red flag warnings causing huge delays on pension transactions

Increased due diligence has given way to "over the top" scam screenings that are causing significant delays on certain pension transfers and switches, providers have claimed.

Both self-invested personal pension and small self-administered scheme providers have complained that scam red flags are being “over-used” and subsequent delays in legitimate transfers are causing consumer detriment.

While the industry has recognised the importance of having protections in place, particularly at a time when scams are on the rise, providers say they should be able to take a proportionate view when all the parties involved are acknowledged leaders in the market.

Stephen McPhillips, technical sales director at Dentons Pension Management, said: “It is right and proper that caution is exercised when making decisions on, what is for many, the largest asset an individual may have accumulated in their lifetime.

“That said, the process for transferring/switching pensions should not be so laborious and time-consuming that it deters consumers from doing it, where a decision has been made to make the move. 

“Consumer detriment could arise as a result of unacceptable delays/barriers; for example, a time-critical investment may be thwarted because of excessive delays by the ceding scheme – however well-intentioned the ceding scheme was in its due diligence processes.”

The ceding schemes have argued these checks are in savers’ best interests and they must accept there will be delays.

But other providers and advisers have warned that if these delays impact on certain transactions, for example if a client misses a property purchase, then it could come back to bite them as they face a raft of complaints.

Richard Mattison, director at Whitehall Group, said delays in switches and transfers can cause a number of significant problems with losing deals, additional costs, bad will with vendors, among other things.

“It has reached the stage where we have to try and manage client expectations by warning them it could be six months before their transfer is completed and their deal is done,” Mr Mattison said.

“As these investments are often linked to the operation of their businesses it causes business interruption as well, which nobody needs particularly in the current climate.”

Nathan Bridgeman, director of Westbridge Ssas, has also seen this as a growing issue.

He said: “We have seen cases of third-party vendors pulling out of sales to Ssas as pension transfers have taken so long with unreasonable and unfair obstacles being put in place by the ceding schemes.”

From weeks to months

Stuart Gibbs, chartered financial planner at Prydis, told Financial Adviser this issue was especially prominent with Sipp to Ssas transfers, which he has seen more of throughout the Covid crisis.

Mr Gibbs said although it depends on the assets of the ceding scheme, transfers used to generally be a matter of weeks, with two months maximum.

But now it takes one to two months minimum and he has seen transfers take three to six months due to the extra due diligence carried out by the ceding scheme.

Mr Gibbs said: “Providers are covering themselves more nowadays and the client has to answer a lot more questions.”

The adviser explained that one provider has introduced a new form for transfers, which has become the next step in the process.

It asks the client to confirm how they have heard about the receiving scheme, their investment intentions and, if it is a Ssas, what their link is with the employer.

Mr Gibbs said this was just another step in the process that causes delays.

He said: “The ceding scheme would argue it is protecting the member but the adviser sees it as yet another hurdle that is over the top and not needed.”


Mr Gibbs explained how advisers tend to have providers of choice, which they will use for the majority of transfers and switches.

With the big providers it is obvious it will all be above board and therefore too much work should not be required, he said.

But he suggested providers should have a list of regulated advisers to speed up the transfer process.

Meanwhile, Whitehall Group's Mr Mattison said HM Revenue & Customs and The Pensions Regulator should rubber stamp providers rather than placing all the emphasis on the transferring company. 

He said: “These firms should also be encouraged to produce their own ‘safe lists’ to speed up pension transfers. This whole area is long overdue a complete overhaul.”

Dentons' Mr McPhillips agreed that ceding schemes should be capable of quickly checking on the legitimacy of the provider/scheme into which the member is looking to transfer. 

He added: “HMRC’s current process for first checking, and then, potentially, registering new Ssas should give ceding schemes some comfort that previous scams involving some Ssas should no longer be a major issue.”

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