The first year of new pension transfer regulations saw pension transfers marred by a high number of ‘amber flags’, according to Quilter.
New freedom of Information (FOI) data from the Money and Pensions Service (MaPS) showed that 80% of all amber flags were raised for either an unknown reason or for a potentially low risk transfer relating to overseas investments.
The data shows that of the 8,395 MoneyHelper Pension Safeguarding Guidance sessions that were conducted since the regulations came into force in November 2021, nearly half (44%) were conducted for a ‘unknown reason’ while just over a third (36%) were conducted after a flag was raised on potentially low-risk transfers relating to overseas investments.
Quilter has called the current drafting of the Department for Work and Pensions’ rules “not specific enough”, pointing out that it has led to many pension savers being forced to take guidance before they are able to make a low-risk transfer.
The wealth manager warned that a lack of detail provided to the MaPS regarding the reason for an amber flag being raised has also led to difficulties in assessing how effective the regulations are.
As part of its FOI request, Quilter asked whether MaPS would consider requiring confirmation of the specific reason why a flag was raised.
In response, the MaPS said: “At the request of DWP we will continue to record if our customers have been informed of the flag identified by their scheme but we do not anticipate the number of unknown flags to change significantly. This has no impact on the guidance session delivered to our customer.
“As part of the guidance session we do ask our customers if they are aware of which flag has been raised and if known this is recorded as part of our MI. A large proportion of our customers are not aware of the particular flag or are unwilling to disclose this to us – this is recorded as unknown on our records.”
Quilter said there have been reports of significant delays in the facilitation of pension transfers by administrators, as well as issues in booking a MoneyHelper guidance session in a timely manner.
With the DWP committed to conducting a full review of the regulations within 18 months of them being adopted, Quilter is calling upon the DWP to consider making it an explicit requirement for all pension schemes to provide clear and accurate information to customers on the reason an amber flag has been raised within its review. In addition, it argues that the resources available for MaPS guidance sessions must be bolstered to ensure customers are seen within a reasonable timeframe to help make the process as efficient as possible.
Jon Greer, head of retirement policy at Quilter, said: “There should be no doubt that the first year of the new pension transfer regulations has helped save people from fraudsters and has given pension scheme trustees and managers real power to safeguard people against pension scams where historically they could only look on in helpless paralysis.
“We applaud the Maps service for the service they provide. However, the positive outcomes have been somewhat watered down by issues faced in the practical application of the rules, as well as a potential lack of information being provided to members which leads to weakened data collections and difficulties in assessing the effectiveness of the regulations.”
Greer says that while there is no legal requirement that pension schemes inform members on which flags have been identified, the guidance provided by The Pensions Regulator is that it expects schemes to do so and it would be remiss of a scheme not to outline any concerns it has.
Greer commented: “We have heard from advisers that those clients in need of a guidance session from MaPS are having difficulties in booking an appointment within a timely manner which may suggest MaPS may not have the resource required to meet the current level of demand, much of which may be unnecessary given the high level of overseas investments related amber flags still being raised.
“While these ongoing issues have caused difficulties in the last year, it is clear the DWP is aware of them and understands the need for clarification. It is vital that the DWP’s ongoing review and subsequent report goes far enough to fully address and resolve the ongoing issues as soon as possible as MaPS is a valuable resource which needs to be used efficiently. Therefore, we ask that the DWP seriously considers making it a legal requirement for schemes to provide their members with clear and accurate information on the reason for an amber flag being raised within this review.”
Neil Walker, partner at Walker Harrison Associates, added: “I have witnessed a marked increase in the number of clients who have been significantly impacted by delays, both in the facilitation of pension transfers by administrators, as well as in arranging a MoneyHelper appointment. The majority of which have had to wait for well over a month before they have had their MoneyHelper telephone call. What’s more, all of these clients were referred for a guidance session as there were overseas investments within the recommendation, though these were all in ‘safe’ portfolios.
“These delays are causing significant stress to clients, and the lack of information provided by the administrators as to why the appointments are necessary is only adding to this. While I appreciate the positive change that the new regulations have provided with regards to ensuring clients do not fall victim to scams, the process desperately needs to be improved to ensure it is as efficient as possible and does not cause undue stress and delays.”
