Trustees lack confidence in new pension scam rules

Trustees lack confidence in new pension scam rules

Almost three quarters of trustees are not confident the new transfer rules will reduce pension scams in the long term, according to research.

The survey from Barnett Waddingham, which polled 101 trustees, found pessimism among trustees, with 25 per cent of respondents believing the new rules will have no impact at all.

The regulations, which came into force on November 30, empower trustees and scheme managers to prevent a transfer request when a ‘red flag’ is present; for example, if a scheme member requests a transfer after receiving unsolicited contact or has been offered an incentive to transfer.

In instances of any ‘amber flags’, such as investments that would normally only be offered to sophisticated investors, a member must obtain guidance from the government’s MoneyHelper service before the transfer may go ahead.

Barnett Waddingham found 76 per cent of trustees believe they are ready for the new rules. However, only 24 per cent of respondents said they have familiarised themselves with the changes since they came into force.

The consultancy stated that several weeks after the regulations took effect, “it is evident that there is a lack of consistency in knowledge and understanding across pension schemes and trustees,” since around one in five respondents stated they do not know where to start looking for relevant information.

Alongside this uncertainty, all trustees (100 per cent) said they were concerned about at least one obstacle to putting the new transfer rules into effect. 

A lack of understanding of the new process (36 per cent); having to use judgement in blocking or allowing transfers (31 per cent); and the complexity of implementing new processes (30 per cent) were the top three concerns, according to Barnett Waddingham.

Exposure to new risks (28 per cent), short timescales (27 per cent) and resourcing issues (23 per cent) were also highlighted as outstanding issues.

Liam Mayne, partner at BW, noted “it will inevitably be disappointing to everyone with an interest in this area to see that nearly three-quarters of our respondents do not view the new regulations as likely to reduce the incidence of scams in the long term.

“Previously trustees could be criticised for withholding a transfer where there had been concerns. The new guidance now provides support for doing so, albeit with little time to implement.

“However, what this research highlights is the need for further robust and unambiguous guidance so that scams can be effectively policed. The results show significant uncertainty – particularly around trustees’ roles and potential exposure to risk in policing pension scams.”

Mayne advised trustees to “sit down with their advisers to ensure that transfer processes have been updated to reflect the new requirements, so that the impact on legitimate member transfer requests is minimised”.

He added: “A lack of a proper structure for decision-making will leave trustees with an uphill struggle - and the first step will be to ensure that trustees have sought guidance on the requirements for their scheme.”