Department for Work & Pensions  

DWP fails to end transfer ‘war’ between PensionBee and providers

DWP fails to end transfer ‘war’ between PensionBee and providers

Attempts by the Department for Work and Pensions and the Pensions Regulator to clarify the intent behind rules governing pension transfers have failed to settle the matter between PensionBee and providers it accused of wrongdoing.

PensionBee announced on July 4 that it had reported a number of pension providers to the DWP, accusing them of exploiting loopholes in the law to unnecessarily block and obstruct transfers.

The People’s Pension, Cushon, XPS and Railpen were among the list of providers cited, although each strenuously denied the charge.

The providers argued that the wording of the relevant regulations explicitly mention incentives to transfer — such as PensionBee’s “refer a friend” scheme — as a reason to raise “red flags”, which means a statutory transfer cannot be permitted.

Intent does not trump the law

Responding to the furore, TPR and the DWP issued a joint statement on July 5 attempting to clarify the regulations, saying that “the regulations are not intended to impose additional burdens on schemes or administrators, or to impact on standard business practices”.

TPR guidance states 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 trustees “may determine that the transfer can proceed without the need for additional checks”.

“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.”

The statement was criticised by Andrew Warwick-Thompson, independent chair and professional trustee, who took to LinkedIn to brand it a “laugh out loud moment”.

He said that trustees are already granting “discretionary” or “non-statutory” transfers where conditions allow, but that this depends both on the “appropriate powers under the trust deed and rules” and on the member signing a non-statutory transfer discharge form.

He suggested the fault lay with badly drafted regulations.

Though the joint statement contends that transfers should cause no concern in “the vast majority of cases”, this would appear to be contradicted by the facts.

XPS reported in February that pension transfer red flags had risen to 50 per cent, despite an overall reduction in transfer activity, while almost three-quarters (70 per cent) of transfer requests made in March exhibited scam indicators.

PensionBee founder and chief executive Romi Savova welcomed the joint statement, hailing it as “a commitment to pension savers’ switching rights”.