Concerns have been voiced over delays of the pension transfer process as the UK’s Department for Work and Pensions (DWP) and The Pension Regulator (TPR) this week issued a joint statement and amended guidance on transfer regulations introduced in November 2021.
These regulations give pensions providers the right to refer a customer for guidance or even refuse a transfer if there are clear indications of problems.
The vast majority of transfers should still go through with no issue but there have been industry concerns that they could delay the transfer process.
Examples given include if there are overseas investments or if an incentive is deemed to have been given to transfer.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “This regulation is intended to give pension providers greater power to protect people’s life savings from scammers and as long as the provider’s pension scheme rules allow, it shouldn’t add any extra red tape where a genuine transfer request is made.”
The regulations, TPR said, are not intended to impose additional burdens on schemes or administrators, or to impact on standard business practices. Likewise, they are not designed to offer protection against normal market volatility.
“Most pension transfers are legitimate and can proceed with minimum intervention. The legislation should have no impact on the process for transfers that, prior to the introduction of the regulations, would have caused no concern.”
It added: “The government remains committed to individuals being able to make decisions about their pension pots but wants to enable trustees to play their part in preventing members from being scammed.”
Daniel Jacobson, senior consultant at LCP, said: “There still remains a fundamental mismatch between the Regulator’s guidance and the wording of the legislation. Until this is tested by a case going before the Ombudsman or the courts to set precedence, many trustees will rightly err on the side of following the wording of the legislation, even if this is not the stated intention of it.”
Although the DWP has committed to a review of the regulations within 18 months, that still leaves the industry with around a year to go, Jacobson noted.
“We would urge the DWP to bring this review forward, to fully engage with the industry, to conclude the review and bring in the changes swiftly and to make meaningful changes that will align the intent and the wording of the legislation and that gives Trustee and the industry clear, workable guidelines to follow,” he said.