To go ahead, a statutory transfer must satisfy the first or second condition. The first applies where the destination scheme is an authorised master trust, local government pension scheme or collective defined contribution scheme. These receiving schemes are essentially blessed in advance as presenting a low risk of a pension scam and, provided the transfer is genuinely to that scheme (as opposed to, for example, a clone arrangement) and there are no (unexpected) glaring signs of a scam, then a transfer can proceed without further fanfare.
The second condition applies to all other transfers and involves an assessment of whether there are any red flags (heightened risk) or amber flags (potential risk) of a pension scam.
In addition, where the destination scheme is an occupational pension scheme or an overseas scheme, the member must provide evidence of an employment link or residency link, respectively.
The presence of a red flag stops a transfer in its tracks and these flags are the hallmarks of a likely scam often involving illegal activity in their own right. For example: cold-calling, provision of financial advice without regulatory permission, pressure on the member to transfer, cashback incentives or promises of access to pension savings that would be unauthorised under the tax rules.
The amber flags are indicators of a potential scam and, if found to be present, mean a transfer can only proceed once the member provides evidence that they have taken scam-specific guidance from Money Helper. If the member does not take guidance or provide adequate evidence then this is a red flag and the transfer does not proceed.
The amber flags are based on scam indicators identified by the industry (including from the Pension Scam Industry Group) and, for the time being at least, are a comprehensive list of the hallmarks of a transfer request or receiving scheme that might not pass the sniff test.
The warning signs are: "high-risk" or "unregulated investments" in the receiving scheme; unclear or high fees being charged by the receiving scheme; the structure of investments is "unclear, complex or unorthodox"; overseas investments included in the receiving scheme; or a "sharp or unusual rise" in the volume of transfer requests either to the same scheme or involving the same adviser.
In addition, failings or inadequacies in the member’s evidence of an employment link (if transferring to an occupational scheme) or residency link (if transferring to an overseas scheme) also count as amber flags.
One or more amber flags does not prevent a transfer from proceeding but the member must receive the scam guidance from Money Helper, giving the member time to pause and consider before pressing ahead with their transfer request.
With power comes responsibility (and potential liability)
