Major issues are continuing to “plague” pension transfer regulations three years on from their introduction, according to Quilter.

New freedom of information (FOI) data from the Money and Pensions Service (Maps), gathered by Quilter, showed that 27,900 out of a total of 33,917 amber flags raised were due to either an unknown reason or a “potentially low risk” transfer relating to overseas investments.

Quilter stated that while it was positive that thousands of members had potentially avoided fraudulent transfers since the regulations were introduced, there was a “huge number” of transfers that had been “needlessly interrupted”, and the knock-on impact on savers had clouded the regulations’ success.

It added that the pensions industry had repeatedly called for legislative change to prevent unnecessary delays, but the Department for Work and Pensions (DWP) had taken “little visible action”.

Of the 33,917 MoneyHelper Pension Safeguarding Guidance (PSG) sessions conducted since the pension transfer regulations were introduced, 15,677 were conducted with an attendee who was unaware as to why an amber flag had been raised on their pension transfer.

Quilter said this suggested that they may not understand why they needed to attend the appointment, and therefore could have an impact on engagement and the effectiveness of PSG sessions.

A total of 12,223 transfers were due to a flag being raised relating to overseas investments.

Quilter noted that while the DWP had acknowledged that the regulation wording in relation to overseas investment was causing delays and issues, there appeared to have been little effort to resolve the issue.

Furthermore, it highlighted that many who had been scammed may also have been subject to a tax charge due to the application of the pension tax system.

The firm called for the DWP to implement changes to improve the pension transfer experience, and urged HMRC to review its rules and said parliament should change the relevant tax law to prevent more people being “unfairly disadvantaged”.

“Change is well overdue,” said Quilter head of retirement policy, Jon Greer. “For three years now, industry has been repeatedly highlighting the issues that pension savers are coming up against as a result of the unnecessary points of friction within the DWP’s regulations.

“A growing number of people have been negatively impacted as their pension transfers have been needlessly halted for what is often no real reason, yet nothing has been done to help them.

“The DWP has claimed it is working to consider whether the rules could be improved, but with no indication of a timeline, it seems more and more people will face undue disruption.

“As a matter of urgency, the DWP must act to resolve the current divergence between policy intention and the practical application of the law when it comes to the overseas investments wording to provide clarity on the distinction between those investments that present a scam risk versus those that do not.

“In addition, the data that the Maps has captured demonstrates a clear lack of clarity provided to customers as to why an amber flag was raised on their pension transfer. Pension schemes must be required to give accurate and clear information to customers prior to these sessions, and the DWP should consider making it an explicit legislative requirement to resolve the issue.

“The potential that thousands of people have been saved from scams is the silver lining. However, those who are less fortunate and have been the victim of pension or investment fraud could face not only the damages of the fraud itself, but also punitive tax.

“HMRC and Parliament must enact change to ensure those who have been the victim of fraud do not face further devastating losses simply due to the way in which tax laws are applied.

“Ultimately, pension savers have suffered needless delays for three years, and it is time the DWP put a stop to it.”

Pensions Age has contacted the DWP for comment.

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