The Government has consulted on combating pension scams. The proposals include restricting rights to transfer pension benefits, and a ban on cold calling in relation to pensions.
The consultation closed on 13 February 2017.
The Government proposes that the statutory right to a transfer value would be restricted to circumstances where:
- the receiving scheme is a personal pension scheme operated by an FCA authorised firm or entity;
- a genuine employment link to the receiving occupational pension scheme could be demonstrated, with evidence of regular earnings from that employment and confirmation that the employer has agreed to participate in the receiving scheme; or
- the receiving occupational pension scheme was an authorised master trust.
The consultation states transfers in other circumstances would still be permitted at the trustees' discretion in accordance with the scheme rules, and that, "The government would expect trustees or managers to make all reasonable efforts to agree a transfer request if there was no reason not to do so (i.e. if the receiving scheme did not appear to be a scam)".
The consultation goes on to state:
"An alternative to limiting individuals’ statutory right to transfer could be to require ‘insistent’ scheme members (who wish to continue with the transfer, despite being warned of the risks) to sign a declaration similar to the example “discharge letter” in the Industry code of practice on combating pension scams. This letter could confirm that the member had understood the scam warnings given to them, and the nature of the risks that they may be exposed to. This letter could also be used to limit any recourse the individual has to the ceding scheme, in the event that the receiving scheme is a scam. The government would welcome views on whether this is a suitable alternative to limiting individuals’ statutory right to transfer, and in particular if it could be implemented in a way that would not reduce the requirement on trustees to undertake due diligence on receiving schemes.
"Such an approach could be coupled with a statutory cooling off period, whereby the ceding scheme would delay all transfers, for example by 14 days, to allow the member to reconsider their decision to transfer. The government would welcome views and evidence on the effectiveness of cooling-off periods as a means of combating scams."
The consultation itself acknowledges that a regular earnings link "could prove difficult to demonstrate in some legitimate circumstances" such as self-employment or a zero hours contract. It states, "The government recognises that these proposals would need to be carefully balanced with ensuring that trustees or managers are not refusing transfers in order to retain pension pots, to the benefit of the scheme and to the detriment of members; and will consider whether it might be appropriate to provide some form of statutory discharge for trustees in such circumstances."