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PensionBee reports providers to DWP alleging transfer rules abuse

PensionBee reports providers to DWP alleging transfer rules abuse

PensionBee has reported a number of providers to the Department for Work and Pensions, accusing them of exploiting regulatory loopholes to obstruct and delay transfers.

The providers, named in a letter from PensionBee chief executive Romi Savova to pensions minister Guy Opperman, include The People’s Pension, Cushon, XPS and Railpen. PensionBee has alleged that these providers are abusing the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations, which were established in legislation in 2021.

The regulations enable providers to flag transfers with a high scam risk, potentially blocking them where certain criteria have been met. But PensionBee has accused providers of using these regulations to obstruct the process and freeze legitimate transfers.

The providers themselves sternly rejected the suggestion that they had been acting in bad faith, with B&CE, the provider of The People’s Pension, arguing that PensionBee’s marketing schemes fall outside the scope of the regulations and so must be flagged.

XPS reported in February that pension transfer red flags had risen to 50 per cent, despite an overall reduction in transfer activity. In the same month, the DWP suggested it might be willing to amend scam rules to ensure that low-risk overseas investments were no longer flagged.

Almost three-quarters (70 per cent) of transfer requests made in March exhibited scam indicators, representing the highest rate of scam flags since December 2020 when the figure stood at 76 per cent, according to XPS.

PensionBee, which was established by Savova in 2014 as a means of making online pension consolidation easier, listed a number of reasons given by providers to justify delaying transfers, such as concerns about international investments, including investments in US indices. Concerns are also flagged around “routine rewards of modest monetary value”.

Though the Financial Ombudsman Service has recently upheld complaints about transfers that take longer than 10 days to complete, PensionBee argued that savers have seen a 45 per cent increase in pension transfer times since 2018, which providers’ obstructive measures are exacerbating.

Savova said: “It’s appalling to see pension schemes abuse regulations to prevent savers from moving their retirement savings to their provider of choice. 

“This type of behaviour is unacceptable for any institution, but particularly for companies that have been entrusted with savers’ hard-earned pension savings. Providers cannot hide behind new legislation to justify the disappointing rise in pension transfer times and must remember the impact their decisions have on the consumers they are meant to serve.”

She argued that regulators should “take pension transfer times seriously and introduce a 10-day pension switch guarantee, a time frame the ombudsman is independently enforcing”.

Providers must ‘abide by the regulations as they are written’

Responding to the allegations, XPS Administration managing director David Watkins told FTAdviser's sister publication Pensions Expert: “I can unequivocally confirm that XPS Pensions Group is not hiding behind regulations to unnecessarily delay transfers.