Trustees should work with IFAs to beat scams, govt told

Trustees should work with IFAs to beat scams, govt told

Trustees should be working with preferred IFAs when it comes to retirement or a transfer request in order to prevent scams, the government has been told.

In response to the government's consultation 'Pension scams: empowering trustees and protecting members consultation', which ends tomorrow (June 10), Premier Pensions Management said trustees should ensure they have an adviser they work with and can refer their members to.

Girish Menezes, head of administration at Premier, said there was a need to balance speed of service with protection of the members from scams and adviser partnerships could help with that.

He said: “A key point is the difficulty in getting a trusted independent financial adviser for DB transfers, leaving members wide open for scams.

“A trustee could suggest a preferred IFA at point of retirement or on a transfer request because a specialist adviser can provide quality education that can help the member understand whether they should be considering a transfer or not. 

“As transfer scams become more prevalent, an increasing number of trustees are suggesting an IFA to increase security for themselves and the member.”

Earlier this year, the Pension Ombudsman already encouraged trustees to recommend advisers to their scheme members but cautioned about setting out clearly who is liable for what.

The ombudsman recognised that retirement planning was a challenge for most members of pension schemes and the role advisers played in facilitating this service.

It said scheme administrators should use IFAs covering the whole of the market and not those restricted to certain types of products or providers and should carry out appropriate due diligence on them, including checking they feature on the FCA register.

Following its consultation the DWP and will propose regulations in relation to the conditions placed on trustees, managers and savers to facilitate a pension transfer.

The government said last month it was looking to enable pension trustees to prevent transfers if there is a risk the pension holder is being scammed.

Its proposals included a system of red and amber flags, warning trustees when pension holders wish to transfer their funds to another scheme which does not fulfil certain criteria, for example an employment link between the holder and the occupational scheme they wish to transfer to.

The consultation came after Royal London lost a court case in 2016, when the High Court decided the provider had been wrong to refuse a pension transfer over concerns about the status of the receiving scheme.

Meanwhile the Association of Consulting Actuaries told the DWP it had concerns about the new system.

ACA chair Patrick Bloomfield, said: “We welcome any effort to limit the opportunity for pension scams to succeed and we acknowledge that this proposed limitation on the statutory right to transfer has been a long time coming and has benefitted from the input of a number of stakeholders.  

“Nevertheless, we find the proposed system complex with the potential to add risk to trustees of transferring schemes.”