In this Update we take a look at regulatory developments over the past quarter.
Abolition of lifetime allowance and other pensions tax changes
In his Budget on 15 March the Chancellor announced the following pensions tax changes:
- abolition of the Lifetime Allowance: the removal of the lifetime allowance charge with effect from 6 April 2023 and abolition of the lifetime allowance altogether from April 2024;
- maximum tax free cash to be frozen at current level of £268,275 (25% of the current Lifetime Allowance) with effect from 6 April 2023. Those individuals who already have a protected right to take a higher tax free cash lump sum will generally continue to be able to do so;
- Annual Allowance to increase from £40,000 to £60,000 from 6 April 2023;
- minimum Tapered Annual Allowance to increase from £4000 to £10,000 from 6 April 2023. (The tapering rules gradually reduce the annual allowance for those classed as "high income individuals".) The "adjusted income threshold" for the tapered annual allowance will be increased from £240,000 to £260,000 from 6 April 2023;
- Money Purchase Annual Allowance to increase from £4,000 to £10,000 from 6 April 2023. (Broadly, this is the reduced annual allowance which applies to those who have already accessed money purchase benefits.)
At first glance, the removal of the lifetime allowance charge (which occurs from 6 April 2023) and the abolition of the lifetime allowance (due to happen in 2024) may appear to be a distinction without a difference. However, the importance of the distinction lies in the fact that various other lump sums (eg some lump sum death benefits) can currently be subject to a lifetime allowance charge if they result in the member's lifetime allowance being exceeded. From 6 April 2023, where the lifetime allowance charge would previously have applied, those lump sums will be subject to taxation at the recipient's marginal rate of income tax.
The Government has published the Finance Bill which contains the provisions to bring into force those changes that take effect from 6 April 2023. This provides that where an individual had obtained enhanced or fixed protection before 15 March 2023 (Budget Day), from 6 April 2023 the events which would previously have resulted in such protection being lost (eg "relevant benefit accrual" in the case of enhanced protection) will no longer result in such protection being lost. The legislation providing for the abolition of the lifetime allowance from 2024 is not due to be included in the current Finance Bill.
In the past few months we have seen a number of cases involving claimants seeking to enforce judgment debts against a defendant's pension fund. We take a look here at recent cases and their implications for scheme providers.
Court orders debtor to draw down whole of pension fund to meet debt
In the case of Brake v Guy the High Court has made a third party debt order requiring the trustee of a SIPP to pay the remainder of the member's pension fund to a creditor of the member. The court order also required the member to execute documents to draw down the remainder of his pension fund. For more detail, click here.
Court orders debtor to draw down pension funds from age 55 and make payment to creditor
The case of Lindsay v O'Loughnane also involved a creditor seeking to enforce a judgment debt by obtaining payment from the debtor's pension funds.
The debtor was a member of three personal pension schemes. It appears that at the date of the hearing the debtor was aged 53, so not yet at an age at which he could demand immediate payment of benefits. The judge made an order requiring the debtor to give written notice to each of the three pension providers requesting that they continue to hold his pension funds and requesting drawdown from the date at which he reached an age at which he was entitled to request drawdown. For more detail, click here.
Appeal dismissed in Bacci v Green:creditors able to claim against pension rights of fraudulent member despite bankruptcy
The Court of Appeal has dismissed an appeal in the case of Bacci v Green, in which the High Court judge had made an order which would enable the member's creditors to enforce their debts against a member's pension fund. For more detail, click here.
Court holds section 91 of the Pensions Act 1995 did not prevent judgment being enforced against member's pension fund
In the case of Re Lloyds British Testing Ltd (in liquidation): Manolete Partners plc v White, the High Court has held that section 91 of the Pensions Act 1995 did not prevent it from making an order allowing a judgment debt to be enforced against a debtor's pension fund. For more detail, click here.
Court holds property held by SIPP should be returned to company
In our January 2022 Update we reported on the case of Ceredigion Recycling and Furniture Team v Pope in which the High Court held that the directors of a not for profit company had acted in breach of their duties when they transferred ownership of the company's property to SIPPs for their own benefit and leased it back to the company. The court has now held that the SIPP providers should transfer the property back to the company. For more detail, click here.
Tribunal finds purchase of shares by SIPP not at arm's length
In the case of Boardman v HMRC, the First-Tier Tribunal of the Tax Chamber has found that a SIPP's purchase of shares from a member was not on an arm's length basis and therefore gave rise to an unauthorised payment. The Tribunal also concluded that it should not relieve the member from liability for the surcharge. For more detail, click here.
Retrospective registration of floating charge did not satisfy authorised employer loan requirements
The First-Tier Tribunal of the Tax Chamber has held that the retrospective registration of a floating charge in relation to a loan which had already been repaid by the time the charge was registered was not sufficient for the loan to satisfy the requirements of an authorised employer loan (Nilebond Limited v HMRC). For more detail, click here.
Permission to appeal sought in Carey Pensions judicial review case
Options UK Personal Pensions LLP (previously known as Carey Pensions) is seeking permission to appeal the High Court's refusal to grant a judicial review application in relation to a decision by the Financial Ombudsman Service (FOS) which upheld a scheme member's complaint against Carey. For more detail, click here.
Loans subject to double tax charge under unauthorised payments legislation
In the case of Dalriada Trustees Ltd v HMRC, the First-tier Tribunal of the Tax Chamber (FTT) has held that loans made to members under reciprocal arrangements between pension schemes gave rise to a double tax charge under the unauthorised payments provisions of the Finance Act 2004. The FTT also found that the statutory grounds for discharging the scheme administrator from the scheme sanction charge could not be satisfied on the grounds that there was no person who satisfied the definition of scheme administrator at the time the relevant events occurred. For more detail, click here.
Registration of overseas entities launched on 1 August 2022: Impact on land transactions
The Economic Crime (Transparency and Enforcement) Act 2022 introduced new requirements for "overseas entities" (eg non-UK incorporated companies) to register on the Register of Overseas Entities which went live on 1 August 2022. An overseas entity which does not register cannot generally enter into real estate transactions. For more detail, see the update prepared by our Real Estate division.
Default options and cash warnings: final rules
In December 2022 the FCA published a Policy Statement including its final rules requiring providers of non-workplace pension schemes to:
- offer a default investment option to new non-advised customers; and
- issue warnings to members holding more than 25% of their fund in cash for a sustained period regarding the risk of the value of the fund being eroded by inflation.
The deadline for compliance with the changes is 1 December 2023. For more detail on the FCA's original proposals, see our February 2022 Update.
Default investment option: final rules
The obligation to offer the default option applies at the time the member enters into the non-workplace pension scheme operated by the firm (regardless of whether an initial cash contribution is made at this stage) and at the point of the initial cash contribution into the non-workplace pension scheme. The requirement to offer a default option does not apply where a firm has legacy only business, ie where it does not enter into a new non-workplace pension with non-advised clients after 1 December 2023. The FCA clarifies that offering new investments to existing non-advised clients does not prevent a firm from falling within the "legacy only" category.
The FCA rules exempt "bespoke SIPPs" from the requirement to offer a default option. The FCA categorises a bespoke SIPP as one where the operator does not offer, distribute or promote any investments or promote platform services that distribute investments. The FCA clarifies in its policy statement that bespoke SIPPs are "empty wrapper" SIPPs that do not offer a menu of investments from which a consumer must choose, ie the business model is solely to accept instructions from customers who have already identified the investments they want to include.
The final rules allow firms flexibility as to what they call the default option, but say that it must be labelled in a sufficiently clear way to give an indication of its nature and distinguish it from the firm's other offerings.
The FCA requires the default option to include lifestyling unless the needs of the target market make it inappropriate to offer this. The FCA clarifies that by "lifestyling" it means "any automatic and pre-determined change in the investment mix that involves an appropriate level of de-risking in the years before target retirement age". The FCA recognises that lifestyling may occur in the expectation of income drawdown rather than annuity purchase.
As regards issuing cash warnings, the FCA is going ahead with the proposals on which it consulted.
Consumer Duty: confirmation on definition of "closed products"
The FCA has confirmed on its "Consumer Duty – information for firms" web page that a pension product that is no longer sold to new customers would be considered closed for the purposes of the coming into effect of the Consumer Duty, notwithstanding that existing customers can continue to make contributions. The distinction between open and closed products is important because the Consumer Duty comes into force on 31 July 2023 for open products, but 31 July 2024 for closed products.
Review of firms' Consumer Duty implementation plans
In January 2023 the FCA published the findings of its review of firms' Consumer Duty implementation plans. The review focused on larger fixed firms with a dedicated FCA supervision team.
The review findings set out areas of good practice and areas for improvement. Areas for improvement include:
- being clearer as to responsibilities for the overall programme and areas within it;
- insufficient detail on providing timing updates to key governance bodies;
- failure to appoint a Consumer Duty board champion;
- plans with a lack of tangible action needed to comply with the duty; and
- lack of clarity over how outcomes will be monitored.
FCA issues "Dear CEO/Director" letter re Consumer Duty
On 30 January 2023, the FCA issued a "Dear CEO/Director" letter regarding implementing the Consumer Duty in the Consumer Investments sector. The letter makes clear that the FCA expects the Consumer Duty to be a top priority for CEOs and directors personally. It reminds them that by the end of April 2023, "manufacturers" of products should have completed all reviews necessary to meet outcome rules and shared necessary information with their distributors. The letter also contains a reminder that the Duty comes into force on 31 July 2023 for new and existing products or services that are open to sale and renewal, and on 31 July 2024 for closed products or services.
The letter identifies the four initial areas where particular focus is needed as:
- mainstream investments: the FCA will pay particular attention to how platforms, wealth management firms and financial advisers deal with the price and value requirements of the Duty;
- higher risk investments: the FCA expects firms to have effective oversight of introducers, with additional scrutiny of any unregulated introducers;
- scams and fraud: the FCA says firms must take appropriate action to help stop consumers falling victim to scams and fraud; and
- consumer redress: the FCA expects firms to take appropriate proactive action when they identify they have caused harm (either through action or inaction).
The FCA says that during the second half of the implementation period (to 31 July 2023) firms should particularly focus their attention on effective prioritisation, embedding the substantive requirements, and working with other firms where necessary.
FCA to review FSCS limits for pension claims
In December 2022 the FCA published a Feedback Statement on its compensation framework review. The FCA plans to review current compensation limits under the Financial Services Compensation Scheme (FSCS), in particular to consider whether it would be appropriate to increase compensation limits for certain pension claims. The FCA's analysis of FSCS data shows that in 2021, 30.1% of pension claims exceeded the compensation limit.
Financial Ombudsman Service: increase to award limits
The Financial Ombudsman Service has confirmed that from 1 April 2023, its award limits are increased as follows:
- £415,000 for complaints referred to it on or after 1 April 2023 about acts or omissions by firms on or after 1 April 2019; and
- £190,000 for complaints referred to it on or after 1 April 2023 about acts or omissions by firms before 1 April 2019.
Dear CEO letter sets out expectations of life insurers in relation to cost of living
In December 2022 the FCA issued a "Dear CEO" letter setting out its expectations of life insurers in relation to the cost of living. Under the heading of pensions, long-term savings and retirement income, the FCA says it expects to see customers' savings and investment patterns alter because of the rising cost of living, with firms already indicating that customers are considering reducing or stopping their pension contributions. The FCA says that whilst this may be appropriate for some customers who face immediate financial pressures, it looks to insurers to make customers aware of their available options and the short and long term risks of doing this, such as losing out on employer contributions and the increased risk of insufficient funds in retirement. The FCA expects insurers to make it as easy as possible for customers to restart their contributions. The FCA also expects insurers to provide customers with adequate information to make them aware of the risks involved in their current investment strategy and any tax implications of taking money from their pensions.
Thematic review of retirement income advice
In January 2023 the FCA announced that it is undertaking a thematic review assessing the advice consumers are receiving on meeting their income needs in retirement. The FCA says that since 2015 there has been a significant shift to consumers drawing an income from pension funds which remain invested. The FCA notes that advice in this area can be complex, so it is important firms ensure they deliver consistently suitable advice. The FCA says that it will aim to publish a report setting out its findings in Q4 2023.
Consultation on value for money: a framework on metrics, standards and disclosures
The DWP, Pensions Regulator and FCA have jointly consulted on policy proposals to require providers and governance committees of workplace personal pension schemes) to disclose, assess and compare the value for money (VFM) their workplace pension scheme provides. (The proposals also apply to occupational DC schemes, but not SSASs.) The proposals are intended to encourage greater standardisation of reporting, allowing trustees to make more informed investment and governance decisions and employers to better compare DC schemes when choosing where to automatically enrol their employees. The DWP wants to encourage a "cultural shift" from focussing on costs to overall value. It sees the key elements of the VFM framework as: investment performance; costs and charges: and quality of service.
FCA calls on schemes to report pension transfer concerns
The FCA has published a new web page calling on trustees to report to the FCA if they have serious concerns about a pension transfer.
The FCA specifically asks trustees to report to it about:
- individuals who provide unauthorised advice on pension transfers;
- increases in the volume of transfers advised by the same adviser;
- a member requesting a transfer following a cold call or unsolicited contact;
- a member being offered an incentive to make a transfer;
- a receiving scheme with high risk or unregulated investments;
- receiving scheme charges that are unclear or high;
- a receiving scheme investment structure that is is unclear, complex or unorthodox; and
- "potential scam activity".
The FCA also flags that "an unusual pattern of behaviour involving switches within a defined contribution scheme or a sharp or unusual rise in transfer requests involving the same firm" could indicate scam activity.
Some of the factors flagged by the FCA would always be a cause for concern (eg an individual providing unauthorised advice on a pension transfer). For others the position is more nuanced. For example, there may be a legitimate reason why the number of members advised by a particular IFA has increased, but if a pension provider is faced with a sudden flurry of transfer requests from unrelated members in different geographical locations who are all apparently advised by the same individual IFA, the provider might reasonably be expected to ask questions as to why that is.
- Pensions Ombudsman
Complaint not upheld where member unable to close SIPP due to illiquid assets
The Ombudsman has not upheld a complaint by a member who was unable to close his SIPP due to holdings in illiquid assets (CAS-37994-X1V8). The Ombudsman also upheld the scheme administrator's right to continue to charge fees for administering the SIPP, and held that it was not disproportionate for the administrator to set aside £500 in SIPP funds to cover future fees. For more detail, click here.
Ombudsman determination requires SSAS trustees to draw up conflicts of interest policy
The Ombudsman has given directions requiring the independent trustee of a SSAS to ensure the SSAS trustees draw up a policy on managing conflicts of interest (PO-21173). For more detail, click here.
Ombudsman rejects complaints against schemes that made transfers to pension liberation vehicle
The Ombudsman has rejected two complaints against schemes that made transfers to a scheme which turned out to be a pension liberation vehicle. The Ombudsman rejected the complaints on the grounds that the transfers complied with accepted standards at the time (Mr S PO-29578 and Mr R PO-28951). For more detail, click here.
Ombudsman applies Pensions Regulator's 2013 standards to April 2015 transfer
The Ombudsman has applied the standards of the Pensions Regulator's 2013 pension scams guidance, which included the "Scorpion" warning leaflet, when considering the level of checks that a scheme administrator should have carried out before processing a transfer in April 2015 (Mr N CAS-48914-L5F3). For more detail, click here.
Ombudsman orders Teachers' Pensions to reinstate member in scheme following transfer
The Ombudsman has upheld a member's complaint and ordered Teachers' Pensions (TP) to reinstate the member's benefits in the Teachers Pension Scheme (TPS) after the member lost money having taken a transfer value to a scheme which invested in high risk unregulated assets (Mrs G PO-26616). The Ombudsman found that at the point when the transfer took place, the member did not have a statutory right to a cash equivalent transfer value (CETV), as the member's application to take the CETV had been made more than three months after the statutory deadline for doing so had expired. However, the Ombudsman went on to hold that TP had failed to conduct sufficient due diligence and had failed to identify "clear red flags" regarding the transfer. For more detail, click here.
Complaint re lack of active investment out of time, but complaint re transfer value delay upheld
The Ombudsman has found that a complaint made by the beneficiary of a SSAS regarding lack of active investment of scheme founds was out of time. However, the beneficiary's complaint regarding delays in the transfer value process was upheld (Mrs D PO-26429). For more detail, click here.
Ombudsman does not uphold complaint where member relied on incorrect LTA information
The Ombudsman has not upheld a complaint by a member who relied on incorrect information provided by his pension scheme about how much of his lifetime allowance (LTA) he had used (Mr R CAS-42021-V5R7). The member had started to receive a pension before 6 April 2006 (A-day). The fact that the member had started to receive his pension before A-day meant that he had not as a matter of law used up any LTA at the point when his pension came into payment. However, the pension which he had already taken was relevant to calculating how much LTA was available to him in the event of post-A-day benefit crystallisation events (BCE). For more detail, click here.
Ombudsman upholds complaint against trustees who failed to manage conflict of interest in death benefits case
The Ombudsman has upheld a complaint against the member trustees and professional trustees of a SSAS in relation to the distribution of benefits following a member's death (Ms E PO-22369). The Ombudsman found that the member trustees had failed to manage their conflict of interest and had reached a perverse decision. He also found that that the professional trustee had failed to put in place a proper system for managing conflicts of interest and to guide the managing trustees in managing their own conflict of interest. For more detail, click here.
- Pensions dashboards
Government announces delay to pensions dashboards programme
On 2 March the Government announced that the pensions dashboards programme is to be delayed. The pensions minister's statement says that there will be a "reset" of the Pensions Dashboards Programme in which the DWP will play a full role, and that the new Chair of the Programme Board will develop a new plan for delivery. The statement says that the DWP will legislation "at the earliest opportunity" to amend the timing of the obligations set out in the relevant regulations. The pensions minister will provide a further update to Parliament before the summer recess.
- Pensions Regulator
Pensions Regulator exercises powers to appoint independent SSAS trustee
In its determination in the case of the AB Produce PLC SSAS, the Pensions Regulator (TPR) has exercised its power under section 7 of the Pensions Act 1995 to appoint an independent trustee as trustee of a SSAS on the basis that the independent trustee will be able to exercise its powers and duties to the exclusion of all other trustees of the SSAS.
TPR exercised its powers following an application by one of the member trustees. The member trustees were members of the same family. TPR's determination records that there had been a breakdown in the relationship between two of the member trustees in particular, and that the points of contention between them were not confined to the operation of the SSAS.
Section 7(3) of the Pensions Act 1995 allows TPR to appoint a trustee to a scheme if it is satisfied that it is reasonable to do so in order to secure that the trustees have or exercise the necessary knowledge and skill for the proper administration of the scheme, or to secure the proper use or application of the assets of the scheme. TPR concluded that it was reasonable to appoint an independent trustee on both grounds.
TPR noted that the previous independent trustee had resigned because it considered that its role had become untenable because of the ongoing disputes between the member trustees. TPR considered that without an independent trustee there was a serious risk that the trustees as a whole would not have the necessary knowledge and skill to properly administer the scheme. It noted that when one of the members of the SSAS had requested a loan from the SSAS, apparently with the support of the other trustees, it was the independent trustee that had pointed out that this would give rise to an unauthorised payment.
TPR noted that there was a risk of "historic and ongoing unremedied breaches of legislation due to a mistaken reliance on small scheme status". This was because the scheme rules allowed member trustees to be made by majority rather than requiring unanimity. The scheme rules had not been updated since A-day despite the independent trustee circulating a proposed update to the rules on more than one occasion. TPR noted that some member trustee decisions had been taken on a non-unanimous basis.
TPR also considered that the breakdown in the relationship between two of the member trustees gave rise to the risk that each of those member trustees would be influenced by personal disapproval of the other when exercising discretionary decision-making powers. This would result in discretionary decision-making powers not being properly exercised. TPR also considered that there had been an apparent failure to identify or manage conflicts of interest in relation to a decision by the trustees not to pursue rent due from the employer to the SSAS while one of the members personally owed money to a related company. TPR considered that all of the issues identified were relevant to securing the proper application of the scheme's assets.
When the relationship between member trustees breaks down, the independent trustee of a SSAS can find itself in a difficult position, particularly if the dispute renders trustee decision-making almost impossible. This case illustrates that in such circumstances, the impasse may be resolved by TPR appointing a professional trustee with power to act to the exclusion of the other trustees.
Regulator amends transfer values guidance to clarify type of appointment needed
The Pensions Regulator has amended its guidance on dealing with transfer requests to include a link to be provided to members to ensure they book a "Pension Safeguarding Guidance" appointment. It appears that some members wishing to take transfer values have been booking the wrong type of appointment, ie a Pension Wise appointment for over fifties about their DC pensions or an appointment to obtain general MoneyHelper advice.
FRC announces changes to rules for calculating money purchase benefit illustrations
In October 2022 the Financial Reporting Council (FRC) announced changes to AS TM1, the actuarial standard which specifies the assumptions and methods used for calculating statutory illustrations of money purchase benefits. The principle behind the new version, which will apply to illustrations issued on or after 1 October 2023, is that any two providers projecting identical funds for identical members should calculate identical estimated retirement income. This is not the case for the current version which allows some flexibility in determining both the accumulation rate for projecting fund values and the assumed type of annuity. The assumptions used for statutory money purchase illustrations must be the same as those used for pensions dashboard illustrations.
The FRC is going ahead with its plans to assign funds to a "volatility group" and specify the rate of return that must be assumed according to the fund's volatility group. However, in response to feedback it has made some changes to its approach, including assigning unquoted assets to "volatility group 3" for the purpose of determining the accumulation rate. The FRC's feedback statement notes that it received feedback from providers of "more bespoke SIPPs" that beyond unquoted assets there can be other investment types for which volatility cannot be reliably measured, eg investments in individually selected stocks (as opposed to pooled funds). In such circumstances the FRC believes assuming investment returns in volatility group 3 would not be unreasonable. The FRC has published guidance designed to assist pension providers in applying AS TM1, in particular regarding assigning investments to volatility groups.
The FRC's changes to AS TM1 have proven to be controversial, with a significant proportion of respondents to the consultation raising issues. When issuing statutory money purchase illustrations, trustees and providers will have no option but to comply with AS TM1. However, to the extent that they have discretion over the wording of member communications, care should be taken to try to ensure that members understand the limitations of statutory money purchase illustrations.
HMRC GAAR panel finds purchase transaction involved contrived steps designed to circumvent member loan restrictions
HMRC's General Anti-Abuse Rule (GAAR) Advisory Panel has found that arrangements entered into between a scheme and a member were not a reasonable course of action, as they involved abnormal and contrived steps designed to avoid tax on a transaction which was to all intents and purposes a loan to the member.
The matter involved a single member registered pension scheme, the trustees of which were the member and a professional trustee company. On 8 June 2016 the pension scheme trustees invested £100,000 in an investment referred to as a "P Class 2 Cash Fund". On 7 July 2016, the member entered into an agreement with the scheme trustees to purchase the cash fund investment for just over £100,000 on terms that the member would pay the purchase price in ten annual instalments plus the interest at 3% above the base lending rate. The cash fund units were transferred to the member that same day. On 14 July 2016 the member surrendered the cash fund investment for £100,038.16.
HMRC's GAAR Advisory Panel concluded that the terms on which the investment was sold to the member did not appear to be normal, as it appeared to HMRC that such a financial investment would ordinarily be sold for an immediate payment in cash, and that terms for payment extending over 10 years were abnormal. HMRC considered that the transaction was not a reasonable course of action. It considered that there was an intention to produce a result that was economically indistinguishable from a loan to a member, but without incurring the unauthorised payment tax charges which a loan would incur. This pointed towards tax abuse.
It is possible for a member to purchase assets from a SIPP without this giving rise to an unauthorised payment provided this is done on arm's length terms. However, a loan to a member will give rise to an unauthorised payment. This HMRC GAAR opinion underlines that when assessing the nature of a transaction, HMRC will focus on the substance of the transaction rather than simply its form.
PASA good practice guidance on DC transfers
In October 2022 the Pension Administration Standards Association (PASA) published its Good Practice Guidance on DC Transfers. The guidance includes:
- a suggested standardised "process flow" setting out the steps which need to be undertaken as part of the transfer process;
- a recommendation that trustees agree with their administrators acceptable service levels regarding the timescale for processing transfers;
- template communications that can be used in the transfer process.
The guidance has no official status, but PASA expects the Pensions Ombudsman to refer to it as a source of what good industry practice looks like.
PSIG Interim Guidance on Combating Pension Scams
The Pension Scams Industry Group (PSIG) has published an interim practitioner guide on combating pension scams, effective from 20 March 2023. The code does not have any official status, but is intended to set a good practice industry standard.
The introduction to the guide says that PSIG's original intention had been to update its code to coincide with the change to the regulations governing transfer values which took effect from 30 November 2021 (covered in our previous Update). However, the mismatch between DWP stated policy intent and the wording of parts of the legislation has made it impossible for PSIG to issue definitive good practice guidance, as PSIG has found differing views between its members and little consistency in practice for it to incorporate into the guidance. The points of greatest concern to PSIG are the inclusion of overseas in investments in a receiving scheme as an amber flag and the broad definition of the offer of an incentive as a red flag. PSIG notes the current absence of Pensions Ombudsman determinations and court judgments relating to these key issues.
The guidance considers the arguments for and against using a "clean list" of receiving schemes considered not to involve a pension scam risk and to which the transferring scheme is willing to make a transfer without seeking evidence of the absence of red or amber flags. It also considers the issues around transfers made using discretionary transfer powers. The guidance explains the different types of red and amber flags and sets out PSIG's view of the information which should be included in member communications.