The Department for Work and Pensions (DWP) has announced plans to work with The Pensions Regulator (TPR) and industry on potential changes to improve the pension transfer experience, without undermining the policy intent.

The comments were made as part of the DWP’s review of the pension transfer regulations, which found that whilst the original policy intent remains appropriate, concerns over their application remain, particularly on incentives and overseas investments flags.

In particular, the DWP heard evidence that the incentives flag is incorrectly blocking transfers due to the different interpretation of the flag by some providers.

In addition to this, the review suggested that the overseas investment amber flag needs to be more clearly defined or removed, as respondents argued that the way it is structured can mean that an amber flag needs to be raised, even when schemes have no concerns.

These concerns were also reflected in the transfer data, as the review found that overseas investments included in the scheme was the most common amber flag, making up 57 per cent of amber flags.

Several individuals were also required to attend multiple safeguarding appointments, according to the review, even if they are consolidating because individual schemes are identifying flags.

The DWP acknowledged that these practical issues are likely to have increased the transfer times of a pensions safeguarding appointment, with respondents warning that transfers are taking longer due to the additional due diligence checks required and longer waiting times for MoneyHelper appointments.

Indeed, the review revealed that the waiting times for an appointment have on average increased from 2 to 6 weeks over the period of the regulations.

However, the DWP clarified that while some in the industry have reported savers having significant issues in so far as transfer requests being delayed or blocked due to the existing regulations, to date The Pensions Ombudsman has received a small number of complaints, with most of these being in respect of blocked transfers where there has been a red flag.

The 18-month review gathered insight from over 20 pension schemes, administrators and industry bodies, 11 of which, representing over 10 million members, provided data returns that were aggregated for the review.

The data, collected from 1 January 2022 to 31 December 2022, covered around 290,000 completed transfers, revealing that 94 per cent of transfers were completed under condition 1 or condition 2 where no flags were present.

Meanwhile, 5 per cent of transfers were completed outside of the regulations (contractual or discretionary transfer), while 1 per cent were completed with a red or amber flag present, which DWP highlighted as suggestion that around 1 per cent of transfers showed signs of scam activity.

Of the 290,000 overall transfers, 2,400 transfers were given at least one amber flag, with 96 per cent of these transfers proceeding to transfer, while 4 per cent did not.

A total of 300 transfers were given at least one red flag, 47 per cent of which were due to the member failing to provide required information, while 26 per cent were due to the member not providing evidence of receiving MoneyHelper guidance.

The review also included further insight from the Money and Pension Service on pension safeguarding appointments, revealing that there were over 12,600 pension safeguarding appointments between December 2021 and February 2023.

However, 43 per cent of attendees were unsure of the flag type.

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