Lisa Webster: The growing transfer headache

It’s been eight months since the DWP made changes to the statutory right to transfer. Over that time the number of transfers being held up by the new anti-scam measures appears to have steadily increased. More and more customers requesting transfers are being referred to MoneyHelper for scams guidance, often for what seems like the most low-risk of transfers. We’ve even seen some accusations that firms may be ‘abusing’ the legislation in order to delay transfers. It prompted a joint statement form the DWP and TPR explaining the ‘legislation should have no impact on the process for transfers that, prior to the introduction of the regulations, would have caused no concern’ But will this make any difference? The key issue here is that although TPR has updated their guidance, the regulations (set by DWP) are law – and they are written in broad terms. The two ‘flags’ which are causing most of the issues relate to overseas investments and incentives. The regulations state that there is an amber flag present where “there are any overseas investments included in the receiving scheme”. Most pensions won’t be invested exclusively in the UK, and having a global equity fund, or shares in Amazon is not the problem the rules are designed to tackle. But if you follow the letter of the law – as opposed to the TPR guidance – then arguably these investments in the new scheme should prompt a visit to MoneyHelper before a statutory transfer can proceed. A similar, but more nuanced issue is that around the definition of incentives. The regulations state that where “the member has been offered an incentive to make the transfer” then a red flag should be raised – and the transfer stopped. The definition in the regulations includes offering free pension reviews, access to pensions before minimum pension age or cashback from their pension savings but is not an exhaustive list. So, is cash from the provider for referring a friend (not paid from pension savings) an incentive? In fact, in most cases there is some form of ‘incentive’ – be it lower fees, better service or better investment choice – that has prompted someone to transfer. Precisely where the line should be drawn is not always clear. It’s important to remember that the rules only apply to statutory transfers. The most recent update to the guidance is that trustees should consider normal industry practice and allow a discretionary transfer if the rest of the due diligence shows the scheme as low risk. We can only hope that common sense prevails, and unnecessary delays are reduced. However, the problem is that law trumps guidance when challenged. So until we have the promised review of the regulations from DWP we may still see some scheme trustees digging their heels in. Lisa Webster is senior technical consultant at AJ Bell. She is an economics graduate with over 15 years’ experience in financial services. Prior to joining AJ Bell in May 2014 she spent nine years working in senior technical and consultancy roles at a major SIPP and SSAS provider. She is part of the AJ Bell Technical Team, responsible for providing regulatory and technical analysis to the business and outside world. Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Twitter: @lisasippster

Lisa Webster: The growing transfer headache

Related items

News from Twitter

Articles by Keyword