Pension scams remain a significant threat to savers with more needed to combat the devastating effects on victim’s lives.
Empowering trustees and protecting members consultation
The Department for Work and Pensions (DWP) has published a consultation seeking views on a set of draft regulations concerning pension scams.
The proposed Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 will require the trustees or managers of a scheme to ensure that at least one of four new conditions is met before they can act on a pension transfer request.
The transfer conditions
Amber flags include high risk or unregulated investments, unclear or high fees, complex or unorthodox investment structures and whether there has been a high volume of transfers to a single receiving scheme or involving a single adviser or firm.
The proposed red flags are financial advice provided without the appropriate regulatory permissions, a request prompted by unsolicited contact and pressure to make the transfer quickly. A member not providing evidence that they have received guidance from MaPS following an amber flag will also be considered a red flag.
The consultation only ran for a short period of time and the DWP intends for the regulations to be in place by Autumn 2021, supported by guidance for trustees and scheme managers from the Regulator and FCA respectively.
Online Safety Bill published
The draft Online Safety Bill announced in the Queen’s speech plans to introduce legislation to improve internet safety.
In a report published in March, the Work and Pensions Committee reflected that the introduction of pension freedoms in April 2015 and the cold-calling ban introduced in January 2019 has seen scammers move online and towards social media.
The issue has been further heightened by the coronavirus pandemic. In the report, the Committee had called for the Government to act quickly and to legislate against online investment fraud in the upcoming Bill.
Under the draft Bill, online service providers providing regulated user-to-user services or search services would be subject to a series of new duties that aim to minimise the presence of harmful material and the time it takes to remove such content.
The Bill will be reviewed by a joint committee of MPs before a final version is formally introduced into Parliament to debate.
Capita comment
The draft regulations are welcomed as there has been a need for support for those dealing with a pension scam concern for some time. Many involved in running a scheme have found themselves in a difficult position where a scam is suspected, but the legislation required them to make the transfer, and the proposals go some way in removing this problem. However, the requirements in the draft regulations are very detailed and may require a judgement call which could cause problems in practice.
Although at this stage the regulations are still in draft, and so some modifications are expected, it is unlikely that the general framework will change. It is therefore important for trustees and scheme managers to be aware of the changes so that processes can be put in place to comply quickly with the proposed requirements.
We have published a Spotlight which looks at the consultation in further detail. Please speak to your usual Capita contact if you would like a copy.