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.
It’s appalling to see pension schemes abuse regulations to prevent savers from moving their retirement savings to their provider of choiceRomi Savova, PensionBeeXPS 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.
“The regulations which came into force last year are about protecting members from the ever-increasing prevalence of scams. While they are a solid foundation, there is widespread recognition among the industry that they are not perfect and that there are some issues still to be resolved.
“We are actively working with government and industry partners to seek a change in the regulations that would make routine transfers operate more smoothly.”
He continued: “Until those amendments are made, we will continue to abide by the regulations as they are written, taking into account legal advice we have received on how we approach transfers. XPS Pensions Group will always prioritise the safeguarding of members’ savings over commercial considerations.”
A spokesperson for the Cushon Master Trust likewise denied the suggestion that actions regarding transfers were motivated by ill-intent, pointing out that trustees are obliged to abide by the regulations as written, “which are there to protect members”.
“The regulations are clear that an incentive to transfer is a red flag and where an incentive has been given, a statutory transfer cannot be permitted,” they explained, telling Pensions Expert that legal advisers had instructed that PensionBee’s “refer a friend” scheme “constitutes an incentive which means that we cannot permit a statutory transfer”.
“Under our scheme deeds and rules we are able to allow non-statutory transfers, but in these instances the trustees are required to apply more stringent checks and follow more robust processes to ensure members’ interests are protected,” the spokesperson said.
“The trustees have also written to the minister of pensions and financial inclusion to request clarification on the regulations in light of the legal advice we have received. We are awaiting a response.”
The Cushon trustees are advised by Arc Pensions Law. Arc managing partner Rosalind Connor added that the transfer regulations “have caused a lot of challenges for pension schemes”.
“Although they are aiming to deal with a serious issue — the ongoing pensions scams risk — their reach is much broader than that,” she said.
"The problem is that a red flag, such as an incentive, does not just take away the right of a member to demand a statutory transfer, but also the ability of a pension scheme to make one. The legislation is clear, and the market has to live with that unless and until the regulations are changed.”
A B&CE spokesperson suggested that PensionBee’s marketing initiatives fall outside the scope of existing legislation.
“The regulations’ broad reference to ‘incentives’ means that any transfer which has been incentivised cannot proceed as a statutory transfer,” they explained.
“We believe we are one of a number of providers to receive advice similar to this, and while we appreciate that the legislation may not match the policy intent, our trustee must apply the law as it stands.
“We have been in contact with PensionBee to find a way forward in the best interests of our members who wish to transfer, and we have taken a number of steps to explore alternatives. The additional checks we are having to undertake in no way prevent our members from transferring their funds.”
In a statement, Railpen said: “In November, following the introduction of new regulations, Railpen adapted its approach to member transfer requests. Our new approach ensures we are acting in accordance with regulations while providing greater protection for members. It includes additional steps to ensure members are aware of the risks of transferring and checklists to help us identify any flags which might cause concerns over scams.
“Our primary aim is to protect our members, and while we understand that these steps have added some time to the transfer process, we are focused on keeping our members, and their money, safe. We have introduced extra support for members as part of our transfer process, with signposting as well as informing them of the additional steps and likely time to completion in order to manage expectations.”
Responding to the suggestion it was PensionBee’s own marketing schemes that necessitated red flags, Savova told Pensions Expert she was disappointed to see providers “taking the mickey out of their customers and the DWP”.
Scam warnings on DB transfers near record high
The number of scam warnings on defined benefit transfers is near a record high, despite a downward trend in transfer activity, XPS Pensions Group has said.
“On several occasions, the DWP has clarified the intention of this legislation. The pensions minister even set out the definition of an incentive as a ‘too good to be true offer’ such as free pension reviews or early access to pension cash,” she said.
“From this guidance and subsequent communication, it is clear that commonly used referral-like programmes, which are offered by many of the largest pension providers in the country, are not a cause for concern or sufficient reason to delay consumers from moving their own money.
“Pension providers have a duty to treat their customers fairly, yet a handful of actors appear to have taken the opportunity to misuse recent legislation rather than create products that make their customers want to stay. These also happen to be the same providers who often refuse to use electronic pension transfers and have appalling pension transfer times.”
The DWP has been approached for comment.
Benjamin mercer is senior reporter at Pensions Expert
