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I have recently changed companies and want to transfer my workplace pension to my new employer’s provider, a large, well-known insurance company.
The last time I transferred a different pension to the old provider, which I now want to leave, I did so without problems.
I have started an application, but this same provider wants signed statements wanting to know my pension plans and whether it is high risk, plus they want me to send them (preferably) a photo ID.
I have rejected you because I think your questions are intrusive.
I understand some requirement for this, if it were suspicious, for example. But why am I being asked this when I plan to move my pension to a legitimate company and, more importantly, I have to comply with the request?
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Transferring a pension: I am asked intrusive questions about a transfer to a legitimate company
Steve Webb responds: Your pension transfer application has been affected by rules designed to protect people from scams.
As I’m sure you know, too many people have transferred pension money into different arrangements only to discover that they work poorly, cost a lot in fees or are outright scams.
These new rules are designed to protect people from such risks.
Please note that we are talking here about transferring a ‘pot of money’ pension and that more comprehensive rules apply to people who want to transfer old-style salary-related pensions.
What are the rules on pension transfers?
Until November 2021, pension trustees, like those looking after the old workplace pension, had no power to block pension transfers, even if they were seriously concerned that the money would end up somewhere they seemed quite doubtful.
This may be the reason why your previous transfer went smoothly.
What changed at the end of 2021 is that before a transfer takes place, the system holding the money must perform certain checks. Your former pension provider is not “nosy” but rather follows the established process.
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The only exceptions to these requirements are where the scheme you are transferring to is a public sector scheme or an authorized master trust.
However, I will return to your point about the fact that you are transferring to a well-known and respected insurance company with, presumably, a very low risk of being scammed.
The way the new rules work is that the details of your transfer request can trigger two levels of warning:
– TO ‘Red flag’in which case the trustees can block the transfer entirely;
– A ‘amber flag’in which case you would need to take part in what is called a ‘Pension Protection Guide’ conversation with MoneyHelper (see box below) before the transfer can take place.
Top items on the list of red flags, which raise serious concerns, include:
– The transfer was caused by an unsolicited “cold call”;
– Member reports feeling pressured to transfer;
– They are offered some type of “incentive” for the transfer.
If one of these red flags appears in response to the plan’s questions, the trustees may consider there to be a high risk of fraud and therefore refuse to make the transfer.
There is a longer list of items that may cause some concern that fall into the amber flag category. These include:
What is MoneyHelper?
MoneyHelper is a free, impartial and secure guidance service that any citizen can consult about their finances, writes This is Money.
It is an independent body from the Government, which finances it.
MoneyHelper website It has lots of information and easy-to-search guides, or you can call, use web chat (or WhatsApp for some things) or send a query via an online form to their staff.
It says: ‘Our trained staff can help you determine what is best for you. Whatever your query, we are here to help you. If we don’t know the answer, we will point you in the right direction to someone who does.
– The recipient plan invests in “high risk” or unregulated investments;
– Receiving system rates are “high” or unclear;
– The investment structure in the recipient plan is “unclear, complex or unorthodox”;
– There are foreign investments in the receiving plan;
– The transfer request is similar to a sudden group of other people towards the same destination scheme.
Additionally, an amber flag may be raised if you are transferring to an occupational pension scheme but do not appear to have an employment relationship associated with the new scheme, or if you do not comply with the rules on residency.
How do the new rules work in practice?
The Government’s view was that the vast majority of transfers would go through this process and that relatively few people would be detained or required to have a conversation with MoneyHelper about scams.
However, the trustees (and their legal advisors) have taken a more cautious stance. For example, since pension funds are typically invested around the world, the amber flag for “overseas investments in the receiving scheme” may be activated periodically.
The Government assumed that pension schemes would quickly develop a “safe list” of providers (such as the reputable insurer you are transferring to) who were at low risk of fraud and would accept such transfers.
But if one of those transfers went wrong, the trustees would potentially be liable because they did not apply the red flag/amber flag process that was available to them. It is no surprise that the trustees have chosen to err on the side of caution.
If you refuse to respond, this is likely to raise concerns among the trustees and they could block the transfer.
There is still some confrontation over this issue between the Government, which thinks pension providers are being overzealous, and pension schemes and trustees who do not want to run the risk of being sued if things go wrong.
Hopefully at some point a common sense solution will be found, but for now the transfer system is a bit messed up as a result of these well-intentioned regulations.
You ask if you are required to answer these questions and the answer is “no”, but if you refuse to answer this is likely to raise concerns among the trustees and in any case they could block the transfer.
You can read more about the measures to Protect people from scams on MoneyHelper website.
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