Nearly 500 defined benefit (DB) pension scheme members have been interviewed after their application to transfer was flagged as a potential scam, a Freedom of Information (FOI) request by advisory firm LCP revealed.
The measure is part of the Department of Work and Pensions (DWP) guidance introduced in November 2021 to combat fraudulent pension transfers.
Under the rules, pension schemes are required to check transfers to see if they trigger either ‘amber’ or ‘red’ alerts indicating the potential for scams.
When a transfer is flagged as amber, the Money and Pension Service is required to do guidance interviews with scheme members and complete an anti-scam safeguarding assessment before the transfer can go ahead.
In order to trigger an amber alert, there are several risk factors that need to me met, LCP explained. These include:
- The presence of high-risk or unregulated investments included in the receiving scheme;
- The fees being charged by the receiving scheme are unclear or high;
- The proposed investment structures are complicated or unorthodox;
- The receiving scheme includes overseas investments or any of the advisers are based overseas; and/or,
- The presence of a high volume of transfers to a single receiving scheme or involving a single adviser or firm.
Lack of data
The Money and Pensions Service said in the FOI that it has made 792 contacts since the introduction of the rules, 488 of which resulted in completed interviews and another 178 are in the pipeline.
Just over 100 did not result in interviews as they were either cancelled (80), the member didn’t show up (35) or they could not be completed (9) – the reason for the latter was not provided by the service.
Daniel Jacobson, LCP senior consultant and lead on pension scams, said: “It is early days for the new regime but it is clear that hundreds of people have already been required to take part in an anti-scam interview before their pension transfer could go ahead.
“At this stage we do not know whether there was an actual risk of a scam in many – or indeed any – of these cases, or whether providers are simply routinely referring a large proportion of potential transfers for guidance, rather than carrying out the expected due diligence under the new transfer regulations.
“We also do not yet have data on whether the member simply ‘ticked the box’ by taking part in an interview but then carried on with the planned transfer regardless. It is very important that DWP and the Money and Pensions Service undertake research into what sorts of cases are being referred, what happens during these conversations and how consumer behaviour is being altered as a result.
“Only then can we say for sure whether these new measures are genuinely protecting consumers”.
