Over 160,000 pensions to be affected by new transfer rules
An impact assessment of the new pension transfer rules has set out the potential effect for providers, employers and members of regulations.
The Pensions Bill announced October 14th 2019 saw the introduction an additional pension transfer rules in order to prevent scams. A background briefing document at the time defined the circumstances under which a pension scheme member will have the right to transfer their savings into another scheme.
The new rules will apply to both defined benefit and defined contributions schemes.
Last month, the Department for Work and Pensions published an impact assessment in relation to the new rules. According to the DWP, these new regulations will impact 100,000 defined benefit transfers and 60,000 transfer from defined contribution schemes.
The proposed rules will require trustees to check that the receiving scheme is:
- Regulated by the Financial Conduct Authority;
- Or has an active employment link with the individual;
- Or is an authorised master trust.
These new rules for transfers are expected to prevent transfer scams, after the “floodgates” were opened due to a 2016 ruling. The Royal London saw a High Court judge rule in favour of a clients’ right to transfer her pension into a new scheme, despite her existing provider’s concerns about it.
At the time, UK’s largest pension scheme administrator, Equiniti, said schemes would find it hard to prevent pension to transfers to any registered pension scheme – regardless of whether they think it is a potential scam.
These new rules should help in the prevention of fraud in pensions and have been included in tougher action to help prevent the transfer of money from legitimate pension schemes into fraudulent ones.
The movement on pension fraud has been a little too slow for many industry experts, however.
Tom Selby, senior analyst at AJ Bell, noted:
The Government’s response to the rise of pension scams has been welcome but far too slow, leaving millions of people at greater risk of falling victim to fraudsters.
This latest intervention, if it becomes law, was first proposed in 2017 and should strengthen the ability of pension providers to refuse a transfer where there is evidence the scheme someone is moving to is being used to facilitate scam activity.
How can Smooth Commercial Law help?
At Smooth Commercial Law, our team of experts have extensive experience in dealing with a whole manner of claims that arise from negligent and/or unsuitable financial advice, including the transfer of pensions. We are seeing more and more mis-sold financial claims, and have managed to secure compensation for many of our clients.
Should you have a claim, we can deal with your case and look to recover compensation for not just your loss of investment but also any adverse tax liabilities that you may now be facing as well.