The Pensions Regulator and the Department for Work and Pensions have sought to allay concerns over pension transfer rules and their application to overseas investments and “small-scale incentives”.
In a joint statement published on July 5, the bodies said that the DWP is currently reviewing The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021, which came into force six months ago.
A report will be published within 18 months of the rules having gone live.
The rules allow trustees to pause or block pension transfers if they deem it necessary, by raising a ‘red flag’.
In addition, they can raise an ‘amber flag’ if they suspect a potential scam, which will mean the member will have to provide evidence they have taken specific scam guidance from the Money and Pensions Service before they are allowed to transfer.
This has, however, resulted in many transfers being delayed.
In February, the government warned that it may amend the rules so that low-risk overseas investments would no longer be flagged.
TPR, meanwhile, said that it had updated its guidance on transfer requests to address these concerns.
“The regulations are not intended to impose additional burdens on schemes or administrators, or to impact on standard business practices,” the statement read.
“Likewise, they are not designed to offer protection against normal market volatility.”
“We understand that concerns have been expressed about applying the regulations where overseas investments or small-scale incentives feature in the transfer,” it continued.
The regulator’s new guidance suggests that trustees may wish to retain records of “low-risk personal pension schemes”, which they can use to oversee some transfers without an onerous administrative burden.
“These records may allow you to maintain a smooth transfer process where due diligence analysis shows no risk,” with TPR advising that trustee "may determine that the transfer can proceed without the need for additional checks,” it said.
“As a reminder, trustees should take a risk-based approach to their decision-making,” TPR and the DWP’s joint statement advised.
“Where a transfer causes no concern, which should be the vast majority of cases, they should proceed with no further action required.
“Where trustees believe the regulations mean there is no statutory right to transfer but they have concluded following due diligence that the transfer is at low risk of a scam, trustees can grant a ‘discretionary transfer’ where scheme rules allow.”
FTadviser reported on July 5 that PensionBee reported a number of providers to the DWP, 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.
B&CE head of pensions policy Tim Gosling said: “This guidance acknowledges the position that the regulations may capture commonly used incentives and where this is the case, no statutory right to transfer exists.
"It suggests that schemes should make a non-statutory transfer at the discretion of the trustee, once additional due diligence has taken place, which is what we have implemented.”