Industry experts have stressed the need to get pension transfer regulation review “right”, after a freedom of information (FOI) request from Quilter revealed that 80 per cent of all amber flags raised are due to an unknown reason or overseas investments.

The FOI data from the Money and Pensions Service (Maps) showed that, of the 13,927 MoneyHelper Pension Safeguarding Guidance sessions that were conducted since the regulations were introduced in November 2021, nearly half (43 per cent) were conducted for an ‘unknown’ reason.

In addition to this, over a third (37 per cent) were conducted after a flag was raised on potentially low-risk transfers relating to overseas investments.

Quilter pointed out that, since the introduction of the regulations, Maps has faced increasing pressure on its services due to a large number of people requiring guidance appointments, many of which are potentially being conducted unnecessarily.

Although the firm acknowledged that it is positive that the regulations mean many people have potentially been saved from fraudsters, it argued that the delay in correcting the drafting of the regulations is "problematic".

Quilter raised concerns that the current pension transfer regulations are not specific enough and have led to an increasing number of pension savers being forced to take guidance before they are able to make even a low-risk transfer.

It also highlighted the high percentage of ‘unknowns’ as demonstration that there is a "real lack of detail" with regards to the reason for an amber flag being raised, which has led to difficulties in assessing how effective the regulations are.

In light of this, Quilter outlined three key asks of the Department for Work and Pensions' (DWP) review to help ensure it goes far enough in putting right these ongoing issues to prevent further waste of resource and to ensure customer protection.

In particular, the firm encouraged the DWP to provide "absolute clarity "through an update to the very broad way in which the rules are worded, particularly in relation to its definition of overseas investments.

“The current drafting makes no distinction between overseas investments that prevent a scam risk as opposed to those that do not, and at present there is a clear divergence between policy intention and the practical application of the law," Quilter head of retirement policy, Jon Greer, stated.

“The DWP and The Pensions Regulator's (TPR) previous joint statement which attempted to resolve this did little to help, so it is vital the DWP goes one step further by amending the legislation to ensure consistency and reduce unnecessary delays to low-risk pension transfers."

He continued: “Secondly, Quilter asks that the DWP makes it an explicit legislative requirement for all pension schemes to provide clear and accurate information to customers on the reason an amber flag has been raised.

"The high percentage of ‘unknowns’ in the last 18 months amount to ineffective data collection which leaves a real gap in our understanding of how effective the rules have been.

“This gap also highlights the potential for increased customer disengagement and frustration if they are not clear on the reason as to why their pension transfer has been delayed. Putting the onus on pension schemes to provide clarity could significantly improve this.

“Finally, we’d like to see the level of resource available for MaPS guidance sessions bolstered to ensure customers are seen within a reasonable timeframe.

"We are aware at times that customers have had to wait a month before the earliest appointment is available. Not only will this help reduce pension transfer times and boost overall efficiency, but it would also mitigate the level of undue stress customers and advisers are experiencing.

“Pensions savers and their advisers have faced major delays and undue troubles in the past 18 months, and much of this can be attributed to the time taken to review the regulations. It is vital that real change is enacted to ensure a considerably improved process going forward.”

Share Story: