Protecting consumers and their legitimate transfers

In recent years, the DWP has introduced new legislation tackling pension scams.

UK pension scams are a type of financial fraud that target people with pension savings. Scammers may use a variety of tactics to trick people into transferring their pension savings to a scam scheme; where the money’s often eroded by fees, lost, or stolen. Pension scams can have a devastating impact on victims.

The UK government has introduced several measures to tackle pension scams, including:

  • banning cold calling about pensions;
  • giving The Pensions Regulator more powers; and
  • requiring pension trustees to check transfers.

New rules came into force on 30 November 2021 to help protect consumers when transferring their pension savings to another scheme. ‘The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021‘ introduced “red” and “amber” flags for pension providers to use when assessing transfer requests.

Red flags are signs the pension transfer could be a scam. If a pension provider sees a red flag, you won’t be able to transfer. Amber flags are signs the pension transfer could be risky. If a pension provider sees an amber flag you’ll need to speak to MoneyHelper, a free government-run guidance service, before you can transfer.

How do these rules work in practice?

These new pension transfer regulations are designed to ensure the pension industry is safer for savers. Remember, these rules are designed to protect consumers - not the profits that pension providers make from managing your money. You shouldn’t have to face unreasonable delays or rejections when making these transfers. Such measures, also known as “sludge tactics,” aren’t acceptable.

As argued in the Financial Times, strong regulations are needed. Consumers’ genuine transfers shouldn’t be delayed to financially benefit pension providers. Sadly, PensionBee has found examples of some pension providers repeatedly misusing the regulations. By applying sludge tactics in unfair ways they’re able to stop consumers from completing legitimate transfers to a provider of their choice.

How’s the legislation being used and misused?

PensionBee is subscribed to Origo, an independent online transfer service for pension savings. As the majority of the industry is subscribed to Origo, many transfers between providers can occur without the need for paper forms. This gives consumers the convenience of simple and hassle-free transfers.

If you’re transferring to an established provider, such as PensionBee, the process can usually be completed within two weeks. For example, as of June 2023, it took PensionBee 10-11 days to complete a transfer to another provider.

However, transfer times can be longer where a provider raises red or amber flags.

Examples of red flags

If your transfer has any red flags, the provider must refuse the transfer. Here are some examples of things a provider (or pension trustee) should consider as red flags.

1. You failed to provide the required information.

If you’re transferring to your employer’s lesser-known pension scheme, for example, your current pension provider may request information to demonstrate an employment link. If you don’t give this information on time, your transfer may be refused.

PensionBee offers personal pensions and not employer pension schemes. As such this red flag isn’t relevant to PensionBee.

2. You haven’t provided evidence of MoneyHelper guidance.

You may be asked to speak to MoneyHelper if your transfer has an amber flag. Providers should explain the need for MoneyHelper guidance and give you enough time for the appointment and confirmation. If you don’t make contact with your existing provider within a reasonable timeframe, they’ll consider this a red flag.

It should be simple to sign up and transfer to PensionBee. As a popular provider for pension consolidation, PensionBee is well-known in the sector. If your current pension provider requires a MoneyHelper appointment, it’s worth considering as to avoid further transfer delays. Be aware that the wait time for a MoneyHelper appointment can be several weeks. PensionBee customers who attend the free MoneyHelper appointment don’t usually find it difficult or stressful.

3. If you’ve received advice on the transfer from an unregulated person without the necessary FCA permissions.

If you’ve received advice on your pension transfer from someone who doesn’t have the necessary FCA permissions to offer pension transfer advice this is a red flag as unregulated individuals don’t have the knowledge or permission to perform this service. Customers should only accept advice from regulated individuals.

PensionBee is authorised and regulated by the Financial Conduct Authority (FRN: 744931). PensionBee has all the required permissions to conduct its business and assist you in transferring your pension pots to PensionBee. PensionBee doesn’t offer advice so this red flag should never be raised by any pension provider in connection with a transfer to PensionBee.

4. You requested a transfer after being cold called (unsolicited contact) encouraging you to make the transfer of your pension pot.

If you’ve been cold called or approached in another way to encourage you to transfer your pension pot that’s not permitted by the law, your pension provider should raise a red flag and stop any subsequent transfer of your pension pot as a result of the cold call.

PensionBee will never cold call you to transfer your pension pot. PensionBee only uses direct marketing to reach its customers. Our most popular advertising channels include TV, radio and Google.

5. You’ve been incentivised to transfer your pension pot.

If you’ve been encouraged to make a transfer with an incentive, this could trigger a red flag. Providers must assess whether the incentive offered indicates a high risk of a scam. This could include loans from your pension or other unusual and sizable payments to you. Some incentives, including small rewards, are considered normal industry practices. If the transfer’s at a low risk of a scam, the pension provider may allow a discretionary transfer.

Similar to many large companies, PensionBee offers a Refer a Friend program that rewards its customers for referring their friends to our service. The rewards given are pension contributions, helping our customers to grow their retirement savings with us. Many pension providers don’t consider a Refer a Friend program to be a prohibited incentive. But a few providers have an extreme view of what an incentive is and use this to stop pension transfers, including to PensionBee. PensionBee and other providers are trying to stop this by asking the government to clarify the rules.

6. You’ve been pressured to transfer.

If you’re pressured to transfer your pension, it could be a red flag - even if you don’t realise it. This could be through direct coercion or passive means, like a courier waiting for forms. Pension providers must assess the behaviour of those involved in the transfer and uncover whether you felt pressured to transfer. PensionBee will never pressure anyone to transfer. You’re in control of how fast you move and whether you wish to proceed at all stages of the transfer process.

Examples of amber flags

If your transfer has any amber flags, you must attend a guidance session with MoneyHelper before the transfer can happen. Here are some examples of things a provider (or pension trustee) should consider as amber flags.

When transferring to an occupational or employer pension scheme, you may not have provided enough evidence to prove employment or overseas residency. Examples of this include: low earnings, short employment history, or lack of employer contributions.

PensionBee offers personal pensions not an employer pension scheme. As such this flag will never be relevant to PensionBee.

2. You can’t prove an overseas residency.

When making a transfer to a qualifying overseas pension, if you can’t fully demonstrate overseas residency, an amber flag may be raised. This also applies if there’s a concern that evidence provided isn’t genuine or has been provided by someone other than the customer.

PensionBee offers a UK personal pension, not an overseas pension plan. As such this flag will never be relevant to PensionBee.

3. The provider features high-risk or unregulated investments.

If your new provider offers investments that are riskier than usual, or they have a higher proportion of high-risk investments compared to a balanced portfolio, this could be treated as an amber flag. This is more likely in cases where the investments are unorthodox or aren’t suitable for an average pension saver. Examples include investing in properties, private companies, or unknown overseas assets.

PensionBee only offers pension plans managed by the world’s largest money managers. All of PensionBee’s investments are in standard investments. PensionBee rarely raises an amber flag, and usually only when the transferring pension provider is small, inexperienced, or using sludge tactics.

4. The provider features high or unclear charges.

If your new provider isn’t transparent with their charges, it could be a sign that they’re overcharging customers. This could be done by layering charges for different services, or by adding additional charges for unclear purposes. These hidden or high charges may be an amber flag that the provider isn’t reputable.

PensionBee believes it’s important to be honest and transparent about all fees, including our own. We charge an annual fee between 0.50% and 0.95%, depending on the plan you choose. This is highly competitive in the market, as our fee includes the full cost of managing your pension investments. PensionBee has been recognised as offering best-in-class low cost pensions for pots under £50,000 and for pots over £50,000.

5. The provider has a complex investment structure.

If the new provider has an unclear or complicated investment structure, this could be considered an amber flag. A complex structure includes one where there’s no clear fund or regulatory body involved in the investment. This may also be the case if the structure of the provider appears to be designed to avoid regulation or exploit loopholes.

PensionBee offers a standard personal pension and is authorised and regulated by the Financial Conduct Authority (FRN: 744931). Again, should your existing provider raise questions or an amber flag around the structure of PensionBee, we’re here to assist in explaining our structure.

6. The provider includes overseas investments.

If your new provider has investments in countries with weak or no regulation, this could be a sign of unlawful business practices. That would be an amber flag, but isn’t to be confused with overseas investments at large. For example, global equity funds managed by established investment companies are common.

It’s extremely rare for a UK pension fund to invest exclusively in the UK. Almost all commercial pension funds will invest across a variety of countries and regions as part of diversification of investment risks. PensionBee offers globally diversified investments in line with best investment practices. The Pensions Regulator has offered guidance that global index funds aren’t the target of this amber flag.

But, some pension providers have suggested that offering any international investments, including in well known global markets like the United States S&P 500, is cause to raise an amber flag and delay your transfer (despite their own funds including investments outside of the UK). Regular overseas investments shouldn’t raise amber flags and should be part of a well-managed pension plan.

Unfortunately, until the guidance is reformed, it may be necessary to go through the MoneyHelper appointment process in order to progress your transfer. PensionBee, along with other leading pension providers, continues actively seeking reform to the regulations in this regard to prevent the abuse of this amber flag.

7. The provider has received an unusual rise in transfers.

If there’s a sudden or unusual increase in transfer requests involving the same adviser or provider, this could be an amber flag.

As a popular provider for pension consolidation, PensionBee receives thousands of transfers each year. We’re one of the fastest growing pension providers because we offer our customers a straightforward way to manage their retirement savings. If your existing pension provider tries to delay your transfer to PensionBee because of our rapid growth, they’re likely using highly uncompetitive and unfair tactics.

How to tackle the nonsense from your existing providers

Even in this age of Open Banking and digital finance, most pension savers still only get a paper statement once a year to find out how much they’ve saved. Since 2018 savers have seen an overall 45% increase in pension transfer times. It’s steadily getting harder, not easier, to move your pension to a provider of your choice.

We’ve seen a small number of rogue providers leap at the opportunity to abuse the transfer regulations, rather than create products or improve services. These also happen to be the same providers who often refuse to use electronic transfers and wilfully disengage from conversations on what it means to treat customers fairly.

No one’s genuinely concerned that PensionBee or other well known providers are “scams”. We should all be vigilant against scams. But we should call out where current regulations are causing unnecessary problems for consumers, acting in their own interests, looking to move their retirement savings to FCA-regulated providers that offer standard investments.

If you’re disappointed in or frustrated with your old pension provider, you can raise a complaint with them. They’re obligated to consider and respond to your complaint and may offer you financial compensation. If you’re unhappy with the response of your pension provider you have rights to seek redress through the Financial Ombudsman Service dispute resolution process.

What’s PensionBee doing to stop providers infringing on your rights?

PensionBee has written to many providers to stand up for the rights of our customers who are seeking to transfer their pensions quickly and efficiently. We’ve also raised the issue with the DWP, who are ultimately responsible for setting the transfer rules, as well as the FCA.

We’ve also shone a light on poor provider practices in the press. While most providers guilty of poor transfer practices in the past have started to apply the regulations appropriately in the first instance, some others continue to frustrate their customers with sludge tactics including unnecessary delays, raising inappropriate amber flags and refusing electronic responses and requiring slower paper forms.

PensionBee will continue to highlight these abuses to the media and to regulators. Our mission’s to make pensions simple so that everyone can look forward to a happy retirement. We’ll always support you as much as we can to complete your transfers smoothly and efficiently.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 06-04-2024

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