Clamping down on pension scams
The Government is expected to bring new regulations into force this Autumn to help block pension scams.
According to Action Fraud, savers lost £1.8 million to pension scams in the first three months of 2021 alone. That’s an increase of 45% on the first three months of 2020.
Lured by attractive online offers and sophisticated websites promising free pension reviews, early access to their savings or one-time-only offers, people unwittingly transfer their savings into scam schemes and often never see their retirement savings again.
To help tackle this, these new regulations – which have been subject to consultation and so could change – would restrict members’ statutory right to transfer from one pension arrangement to another in certain cases.
If a proposed transfer meets at least one of three new conditions, it can go ahead:
- If the receiving scheme is considered low risk scheme, for example an authorised master trust
- If it's not considered low risk, but the member can provide evidence that there’s an employment link between them and the receiving scheme
- If the receiving scheme is a qualifying registered overseas pension scheme (QROPS) and the member can’t demonstrate an employment link, they must be able to demonstrate residency in the same financial jurisdiction as the QROPS
- If none of these conditions is met, trustees or scheme managers will need to assess whether any red flags indicating the signs of a scam are present.
If none of these tests are met, the transfer is then tested for amber and red flags. Triggers for this flags are set out in the regulations, but are likely to include the member finding out about the receiving scheme from unsolicited text messages or emails or through social media.