Our head of pensions and savings comments on new laws that will come into force at the end of the month.
New laws designed to prevent pension transfer scams have been published today, with regulations coming into force on 30 November.
Fraudsters frequently use pension freedoms and the statutory right to transfer from one scheme to another to tempt people to transfer their life savings into a scam.
The statutory right to transfer will now only apply to public service pension schemes, Master Trust schemes and collective money purchase schemes.
Trustees and scheme managers will be able to prevent a transfer request – giving it a “red flag”. A red flag will mean the statutory right to transfer is removed.
An “amber flag” can be used to pause a transfer until the scheme member can prove they have taken scam specific guidance from the Money and Pensions Service (MaPS). The DWP has said it will review the new regulations within 18 months.
Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “The proposals could help to prevent pension transfer scams because they remove the automatic right to transfer a pension – something fraudsters have been exploiting.
“The government also took into account industry concerns that some of the proposed conditions set out in the consultation could result in an uneven playing field between SIPP providers and insurance company pension providers.
“The new system might slow down some pension transfers, although this should not be a significant risk once the regulations have bedded in. It is important that freedom to choose the right authorised and regulated provider is maintained for people who want to move their pension.”
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