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New pension scheme transfer conditions

Shona Harvie, Partner, Pension Funds
21/12/2021
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The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 came into effect on 30 November 2021. Trustees must now ensure that transfer requests meet certain conditions before allowing a member to transfer their pension out of the scheme.

Background

For all transfer requests, Trustees are required to collect certain information about the member, the receiving scheme and about any financial advisor and other individuals involved in the transfer; including names, addresses and registration numbers. Trustees are also required to make sure that for certain transfers, members have received advice from an advisor with the appropriate permission.

The new Regulations give Trustees the power to refuse transfers where there is a heightened risk that it may be part of a scam.

What is changing

From 30 November 2021, Trustees must check that the transfer request meets the conditions to enable a statutory right to transfer.

First Condition

The receiving scheme is a scheme listed in the transfer regulations, which are:

  • a public service pension scheme (schemes established by a public authority for civil servants, armed forces, health service workers, teachers, judiciary, police, firefighters and local government workers)
  • an authorised master trust on the Regulator’s published list
  • a collective defined contribution (CDC) scheme that has obtained authorisation and is included on the list which the Regulator will publish. Transfers to these schemes may proceed without additional checks.

Second Condition

If the receiving scheme does not meet the First Condition, Trustees must check the following:

  • For a transfer to an occupational pension scheme, Trustees have been provided with evidence that there is an employment link.
  • For a transfer to a qualifying recognised overseas pension scheme (QROPS), Trustees have been provided with evidence from the member to either establish overseas residency or an employment link, depending on the member’s employment status.
  • Where there are amber flags (Iisted below) members have proved that they have obtained guidance from MoneyHelper before the transfer can proceed (this is in addition to any regulated financial advice they have already received about their transfer).
  1. The member has not shown an employment link or overseas residency.
  2. The member cannot show an employment link or overseas residency.
  3. High-risk or unregulated investments are included in the scheme.
  4. The scheme charges are unclear or high.
  5. The scheme’s investment structure is unclear, complex or unorthodox.
  6. Overseas investments are included in the scheme.
  7. A sharp, unusual rise in transfers involving the same scheme or advisor.
  • That there are no red flags as follows: (N.B. This is not an exhaustive list).
  1. The member has failed to provide the required information.
  2. The member has not provided evidence of receiving MoneyHelper guidance.
  3. Someone carried out a regulated activity without the right regulatory status.
  4. The member requested a transfer after unsolicited contact.
  5. The member has been offered an incentive to make the transfer.
  6. The member has been pressured to make the transfer.

If the Trustees are not satisfied that the First or Second condition has been met, the member loses their right to a statutory right to a transfer.

After receiving MoneyHelper guidance, the member may choose not to proceed with the transfer. Trustees should then consider whether to report the transfer as a potential scam. If the member still wishes to proceed with the transfer, Trustees should record the decision they have made and arrange to pay the transfer.

Actions for Trustees

Trustees should keep records of all information requested and received, of their assessment, decision and communications with the member. The Regulations include timescales for communicating with members which the Trustees need to comply with.

Trustees need to ensure that their scheme administrators have updated their processes to ensure transfers are dealt with in accordance with the new Regulations.

Insights

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Wide reaching government requirements that could change the current landscape of Defined Contribution schemes.
Assisting Trustees and auditors of pension schemes in dealing with the increasingly raised profile of going concern in financial statements.

Contact us

Shona Harvie
Shona Harvie
Partner, Pension Funds Group
London