The chief executive of the PensionBee Group has written to the Department for Work and Pensions (DWP) to tell the government body that several pension firms are delaying transfers for its mutual customers.
Romi Savova said in the letter to the DWP on 19 May 2022, that the firms reportedly blocking and delaying pension transfers are:
- Mercer;
- Railpen;
- First Actuarial;
- HS Pensions / Salvus Master Trust;
- Cushon;
- The Workers Pension Trust; and
- XPS Pensions.
She said: “The recent pension scams legislation created by your department was a welcome intervention in a pensions industry long plagued by the economic scourge of investment scammers.
“However, contrary to the efforts, great dedication and intention of your civil servants in making the pensions industry safer and more efficient for savers, we have found that the regulations are being abused by a handful of rogue actors intent on using these new regulations to block and delay consumers from moving their own pensions.
“Specifically, we have evidence of providers delaying and blocking transfers on the basis that any and all ‘incentives’ raise a ‘red flag’ under The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021.
“Under this highly inventive interpretation of an ‘incentive’, the relevant parties can deem that anything could be an incentive and therefore anything can create a red flag; from having an app and low fees to excellent customer service, in fact any positive feature can be construed as an ‘incentive’ for someone to transfer away from legacy pension scheme administrators who struggle to provide a high level of customer service.”
Savova added the firm has “seen specific evidence” of its £50 ($60, €58) refer-a-friend scheme being interpreted as an ‘incentive’ that “supposedly warrants a transfer delay and/or a red flag”.
“We would urge you to clarify your position and issue immediate guidance to the legislation on this point, so it is not further abused,” she said.
This comes a week after XPS Pensions Group found that 83% of pension transfers reviewed in May raised one or more red flags – rates have risen for the last five consecutive months.
DWP
In a bid to tackle pension transfer scams, the DWP brought in stricter laws on 30 November 2021.
The rules allowed pension companies to prevent a transfer if suspicious activity is detected.
The traffic light-style system allows providers to stop transfers altogether (red light), or pause it for further scrutiny (amber light) where savers will need to seek guidance from Pension Wise before going ahead.
In a response to PensionBee, Guy Opperman, minister for pensions and financial inclusion, said in a letter on 26 May 2022: “I agree the red flag relating to incentives was not intended to impact on standard business practices, but rather to capture the practices used by scammers. You may be aware that my officials have begun gathering data so we can conduct a review of the regulations with the intention to publish a report in the spring of 2023.
“Although the team, as yet, have not picked up on schemes adopting a blanket approach to the red and amber flags, I am concerned that the regulations may being used, by some, in ways we did not intend. That is why my officials are working with the Pensions Regulator to issue a statement reiterating the position we set out in our consultation response, published in November 2021.
“The statement will stress our position that the regulations are designed to maximise ease of interpretation and allow trustees and scheme managers to take a holistic approach when reviewing transfers. We will also be clear that they draw on the ability of trustees and scheme managers to rely on information already held, as a result of existing due diligence processes.
“Finally, where the transfer causes no concern, which should be the vast majority of cases, the trustee or scheme manager should proceed with no further action required.”
International Adviser contacted the DWP for further comment and a spokesperson said: “Our new transfer regulations are helping protect people from fraudsters trying to trick them into moving their pension pots into scam accounts. This should have no impact on the process for transfers that, prior to the introduction of the regulations, would have caused no concern.”
Response from pension firms
Several of the accused firms hit back at the accusations by PensionBee.
The Workers Pensions Trust said in a statement: “You may have seen references in the press to comments that Workers Pension Trust is trying to prevent members moving their pensions savings. This is not true.
“The trustees are required to process transfers in accordance with legislation to ensure that members are protected when transferring their pensions savings to new arrangements. Recent changes to the law mean we need to check a few additional points in some circumstances before you can transfer your money.”
A spokesperson for the trustees of the Cushon Master Trust said: “Our legal advisers have instructed us 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 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.”
A spokesperson from Railpen added: “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 whilst 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.”
David Watkins, managing director at XPS Administration, said: “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 amongst 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.
“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.”
IA has contacted Mercer, First Actuarial and HS Pensions for a comment – but they did not respond in time for a comment.
Working with PensionBee
One firm which was accused in a media report of delaying transfers of PensionBee customers was the People’s Pension, which is part of B&CE.
A B&CE spokesperson said: “Our lawyers have instructed that some of PensionBee’s marketing initiatives fall outside of the new regulations. The regulations broad reference to ‘incentives’ means that any transfer which has been incentivised cannot proceed as a statutory transfer.
“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 interest 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.”
