Nearly two-fifths (39 per cent) of ‘amber flags’ raised by pension trustees of a transferring pension scheme were due to overseas investments, according to a Freedom of Information (FOI) request by Quilter.

The FOI data from the Money and Pensions Service (Maps) showed that 134 amber flags were raised and the related pension transfers therefore put on hold due to overseas investments between the end of November 2021 and the end of March 2022.

However, Quilter stated that this figure was “a small representation”, as Maps only keeps a record where the member is given the details of the amber flag by the transferring scheme.

Between the introduction of new pension transfer rules at the end of November 2021 and the end of March 2022, 348 amber flags detailed why they had been raised and why guidance was necessary.

Almost a quarter (23 per cent) of amber flags were due to high risk/unregulated investments, 16 per cent were due to unclear/high fees, and 13 per cent were due to a complex investment structure.

Quilter noted that due to the way the new rules are worded, some pension schemes were raising amber flags on overseas investments covering mainstream investments, such as funds from major asset managers that are investing globally.

The new transfer rules state that if a trustee has raised an amber flag, the transfer is paused until the member involved has proved they have received scam advice from Maps.

The FOI data revealed that the number of Maps scam guidance sessions has steadily increased since the introduction of the rules, with 20 sessions received in December 2021, followed by 109 in January 2022, 222 in February and 505 in March, bringing the total number to 856.

“In the 12 months to 31 November 2021, the Money and Pensions Service took just 482 calls and webchats in relation to pensions scams,” commented Quilter head of retirement policy, Jon Greer.

“Comparatively, in the four months that followed the introduction of the new pension rules, this figure nearly doubled to 856. This highlights the real disconnect between the number of people whose pension transfers were potentially being targeted by a scam, versus the number of people who were able to identify this and reach out for help.

“However, while it is positive to see such a noted increase in the number of people receiving scam guidance when it comes to their pension transfers - particularly where there is a genuine cause for concern - there remains a clear issue with transfers being halted where the trustees are finding an amber flag because the new scheme offers overseas investment included in the receiving scheme - as is the case in many UK registered pension schemes. There is a clear divergence between policy intention and the practical application of the law.

“Whilst it is early days the concern is that the number of referrals is increasing at a rapid rate. I fear a material proportion of people may be being required to take scam guidance sessions unnecessarily at a time when the ‘stronger nudge’ to pensions guidance comes into force. We hope the stronger nudge will result in an increase in the number of Pension Wise sessions being taken up, but what we don’t need is referrals to Maps scams guidance where the member’s experience is that it was an entirely pointless exercise.

“What’s more, the lack of information provided to Maps in terms of the reason for the amber flag being raised is concerning. If the information is not logged, and particularly whether there was an actual risk of a scam, it will be difficult to assess where scams are focusing and may provide an inaccurate picture of the effectiveness of the regulation.

“The drafting of the rules is not specific enough in its definition of overseas investments, which make no distinction between overseas investments that present a scam risk as opposed to those that don’t. This appears to be resulting in pension savers being forced to take Maps guidance before they are able to make a low-risk transfer. The DWP has previously stated that the amber flag regulations were not intended to encompass low risk transfers and said it was actively engaging with industry representatives and considering amending the regulations.

“While this is a welcome step, we hope that they address this well within the current 18-month review period it committed to at the commencement of the regulations.”

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