Yahoo Finance Pension savers mulling transfers will have stronger protections against scams
Pension savers will have stronger protections against scammers trying to tempt them into transferring their life savings with bogus offers.
New regulations, which come into force on November 30, will mean that suspect transfers can be stopped from ending up in the clutches of a fraudster, as pension trustees and scheme managers will have new powers to intervene.
Fraudsters frequently offer “free pension reviews”, early access to pension cash, or other “time-limited” offers, which can lead to people being conned out of savings they have been building up for decades.
The changes mean that trustees and scheme managers will be able to prevent a transfer request by giving it a “red flag”.
In other circumstances where fraud is suspected, an “amber flag” will pause a transfer until the scheme member can prove they have taken scam specific guidance from the Money and Pensions Service (Maps).
The UK Government said it is working closely with regulators, the Pension Scams Industry Group (PSIG) and enforcement agencies to protect pensioners and raise awareness of the dangers.
Minister for Pensions Guy Opperman said: “We are tackling the scourge of pension scams in practical terms to safeguard pensioners’ hard-earned savings.
“These measures will provide better protection for savers.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Scammers rob people of their hard-earned retirement savings and for too long schemes have been powerless to stop them. These measures are a welcome step forward in protecting scheme members by giving schemes the power to stop transfers or refer members for guidance if they have any suspicions.”
Anthony Arter, Pensions Ombudsman, said: “Having witnessed the real damage that pension scams can inflict on an individual’s retirement I welcome the new transfer regulations which look to make transfers safer.
“I am optimistic that over time statutory clarity regarding the level of due diligence expected of trustees and additional information and guidance to be given where appropriate to those planning to transfer, will help combat pension scams, and also reduce the number of transfer complaints to the Pensions Ombudsman.”
Releasing funds early, free pension reviews and time pressured offers are all signs of a pension scam. Protect your pension #BeScamSmart Take our quiz to find out more https://t.co/qHGd7cIMbT pic.twitter.com/EMzdvkNq6o
— Financial Conduct Authority (@TheFCA) August 24, 2021
The Government has committed to reviewing the new regulations within 18 months to ensure they remain as effective as possible.
Tom Selby, senior analyst at AJ Bell, said: “Unscrupulous scammers have ramped up their activity during the pandemic, spurred by the increased financial vulnerability experienced by millions of people during lockdown.
“Most of these scams now occur outside pensions, with fraudsters often targeting people aged 55 and over by encouraging them to shift their hard-earned retirement pot into a sham investment.
“Nonetheless pension-based scams do still exist, with the focus often on facilitating access before age 55. Given the terrible impact they have on victims – who often end up losing most if not all of their pension – the Government is right to hand schemes greater power to protect members.”
Mr Selby added: “Crucially, it will be up to pension schemes to decide whether a transfer is suspicious or not. Whereas previously blocking a suspicious transfer came with the real risk of being sued, this legislation creates a specific legal framework within which members’ interests can be protected.
“Provided firms apply these rules sensibly and don’t delay matters by asking the risk questions on transfers where it is clear the risks are very low, they should add extra security for transferring members without impacting the vast majority of legitimate transfers.”
Jon Greer, head of retirement policy at wealth management firm Quilter, said: “Until now, people have had a statutory right to transfer their pension which results in a ludicrous situation where a pension provider is powerless to prevent a customer moving their money to a highly suspicious ‘pension scheme’. This has resulted in pension providers asking customers to sign a disclaimer before they can allow the transfer to proceed.”
He added: “Ultimately, the best course of action to ensure you do not fall foul of pensions scammers is to make sure the person or firm you are dealing with is regulated by the FCA (Financial Conduct Authority); check any offer against the FCA’s Scam Smart website; speak to Money Helper or take regulated financial advice.
“Given a pension is often the largest asset people have other than their home, it is well worth proceeding with care and speaking to a qualified expert before taking any action.”
The regulations are being made across Britain and corresponding regulations will be made in Northern Ireland.
