From 2021, to today – where are we with pension scheme regulation? Stephen McPhillips, Technical Sales Director at Dentons Pension Management Limited revisits an article he wrote in 2021 and looks at the consultation recently launched by the DWP.
On 9 June 2026, the Department for Work and Pensions (DWP) launched a consultation on proposals to amend the Occupational Pension Schemes (Conditions for Transfers) Regulations 2021. The consultation will run until 21 July 2026.
Soon after 2021 regulations came into effect, I wrote an article for Professional Paraplanner and it seems appropriate to re-visit this article in light of the consultation proposals, with updated commentary.
Background
Scams involving pension scheme members (and pension transfers) have been, sadly, an all-too-common occurrence. The Pension Scams Industry Group (PSIG) have stated:
“Most pension transfers are legitimate and can proceed with minimum intervention. However, PSIG estimates 5% of all transfer requests give trustees and scheme managers cause for concern”
In an effort to combat pension scams, the Government took action.
The Pension Schemes Act 2021 received Royal Assent on 11 February 2021 and passed into law.
Amongst a number of other things, it introduced new regulations that trustees and administrators of pension schemes must follow when dealing with transfer-out requests from schemes.
These rules are enshrined in the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 and they came into effect on 30 November 2021. They apply to all transfer requests received on or after this date.
The regulations and supporting guidance were drawn up by the Department for Work and Pensions, The Pensions Regulator (TPR), the Money and Pensions Service (MaPS) and PSIG.
Application
It is important to note that certain types of receiving pension scheme are treated differently to others, which in turn makes the transfer more straightforward.
Transfers into a public service pension scheme, an authorised master trust scheme or an authorised collective defined contribution (CDC) scheme meet the “First Condition” requirements under the regulations and can proceed without any further due diligence checks.
If, however, the receiving scheme does not meet the “First Condition” requirements, the trustees / scheme administrators must consider whether or not it meets those of the “Second Condition.”
It is this “Second Condition” aspect of the new regulations which has presented some challenges to the pensions industry, as it has required some form of due diligence checks to be undertaken by the transferring scheme.
There are no hard and fast rules around what those checks must entail (although there are specific requirements regarding transfers to occupational pension schemes, such as SSASs, (where an employment link between the member and the employer must exist) and transfers to overseas schemes (where checks need to be undertaken on the overseas residency status of the member)).
Flags
The regulations introduced the concept of “amber” and “red” flags for potential transfers-out. Either of these could mean that the pension transfer cannot proceed.
Let’s work on the basis that meeting the “First Condition” represents a “green” flag; the transfer can proceed.
An amber flag means that the transfer might still be permitted to proceed, but the member must first obtain guidance from the MoneyHelper service (part of MaPS). The member must provide (to the trustees / scheme administrator of the transferring scheme) evidence of the fact that he/she has undertaken the process with MoneyHelper. If that evidence is not provided, the transferring scheme can refuse to make the transfer (i.e. it becomes a red flag).
Some examples of amber flags provided by TPR are:
Amber flag 1: the member hasn’t shown an employment link or overseas residency
Amber flag 2: the member can’t show an employment link or overseas residency
Amber flag 3: high-risk or unregulated investments are included in the scheme
Amber flag 4: the scheme charges are unclear or high
Amber flag 5: the scheme’s investment structure is unclear, complex or unorthodox
Amber flag 6: overseas investments are included in the scheme
Amber flag 7: a sharp, unusual rise in transfers involving the same scheme or adviser
The presence of a red flag means that the transferring scheme must refuse to make the transfer. Some examples of red flags provided by TPR are:
Red flag 1: the member has failed to provide the required information
Red flag 2: the member has not provided evidence of receiving MoneyHelper guidance
Red flag 3: someone carried out a regulated activity without the right regulatory status
Red flag 4: the member requested a transfer after unsolicited contact
Red flag 5: the member has been offered an incentive to make the transfer
Red flag 6: the member has been pressured to make the transfer
It is important to note that the presence of amber and / or red flags means that the member does not have a statutory right to transfer. The trustees / scheme administrator of the transferring scheme can make risk-based decisions on these “on balance of probabilities” and there is an appeal process that the member can undertake.
It is also worth noting that trustees / scheme administrators can maintain a list of providers / receiving schemes that have already been accepted following previous due diligence.
TPR produced a very useful decision tree flowchart, which can be found here – https://www.thepensionsregulator.gov.uk/en/document-library/scheme-management-detailed-guidance/administration-detailed-guidance/dealing-with-transfer-requests
DWP’s June 2026 Consultation
The first notable aspect of the consultation is that DWP has quantified the number of SSASs in existence (21,000) and the number of scheme members covered by these (60,000). Until now, it has been very difficult to tell how many SSASs actually existed.
The DWP’s research has shown that there may still be risks attaching to SSASs where people chose to abuse the system and that there is:
“emerging evidence that some savers may have been exposed to high‑risk or unregulated practices involving the misuse of dormant SSASs, investments in non‑standard assets, and arrangements seeking to present pension liberation activity as legitimate investment opportunities.”
Importantly, the DWP recognises that the SSAS sector as a whole is not blighted by poor practices but it is clear that elements of the SSAS market “merit closer and more robust monitoring.”
As a result, and in order to try to prevent scams, the DWP is proposing to make amendments to the existing regulations – particularly the requirement for a clear employment link where a member wishes to transfer into a SSAS.
If brought forward, failure to prove to trustees or managers of the transferring scheme that there is a clear employment link will result in a red flag being present.
This, of course, will block the transfer, as noted above. Currently, failure to demonstrate an employment link would only represent an amber flag.
The DWP has also recognised that the Overseas Investment amber flag (Flag 6 above) may have impacted some transfers and is proposing to remove it, given that there are other safeguards in place.
Commentary
There was absolutely no doubting at time of introduction of the regulations the fact that measures to combat scamming had to be welcomed, particularly those involving members’ lifetime savings within a pension scheme (often the largest single asset an individual will ever have).
The pensions industry has witnessed many forms of scams over recent years, and some of the amber and red flags identified by TPR tackle some of these head on e.g. the member was offered an incentive to make the transfer, the member was pressured to make the transfer and so on.
However, the regulations have slowed down the process of transferring from one scheme to another in some cases and impacted perfectly legitimate transfers being made for sound reasons.
According to the DWP, they may have contributed to increased waiting times for MaPS safeguarding appointments.
It is pleasing to note that the DWP has been willing to review the impact of the regulations and to make sensible changes in order to protect scheme members whilst at the same time recognising that some of the original amber flags could have been preventing perfectly legitimate transfers to reputable providers.
Those reputable providers might be well-respected, well-known ones with a long track record of pensions administration, impeccable service credentials, highly experienced staff, robust due diligence processes of their own and a sound financial base.
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