New law to be introduced to help protect pension savers from scammers
New rules to help protect pension savers from scammers have today become law. Under the regulations, pension trustees and scheme managers will be given the power to stop suspicious transfers before cash gets into the hands of fraudsters.
Fraudsters frequently offer “too good to be true” incentives to pension savers, such as free pension reviews, early access to pension cash, or other time-limited offers. Lured in by these bogus offers, savers are then tricked into transferring their savings into a scam scheme and defrauded out of their money. Between January and May 2021, pension scam losses totalling over £2.2 million were reported to Action Fraud.
Pension providers themselves are not allowed to refuse to carry out a transfer where the saver has the right to do so - even if they have suspicions. But this will change from 30 November when the Government's new regulations take force. From this date, trustees and scheme managers will be able to:
- Prevent transfer requests if suspicious activity is suspected by giving it a ‘red flag’. If a red flag is present the transfer cannot go ahead. We've asked the Government if savers can challenge this decision and we'll update this story when we know more.
- Pause transfer requests where fraud is suspected by giving it an ‘amber flag’. In this scenario, the pension saver will need to prove they have taken scam specific guidance from the free Money and Pensions Service before the transfer can go ahead. This is the only way a transfer can then proceed.
A red flag might appear if the trustees and scheme managers find that financial advice has been given without regulatory permission, if the pension saver has been contacted by an unsolicited person or if they were pressured to complete the transfer quickly. Suspected fraud could also include concerns over the destination of the transfer or where the pension saver is unclear about how their transferred money will be invested.
The Government adds that it will review the new regulations within 18 months to make sure they're effective. Guy Opperman, minister for pensions said: "We are tackling the scourge of pension scams in practical terms to safeguard pensioners' hard-earned savings."
See our Pension need-to-knows guide for everything you need to know about retirement saving.