New regulations aim to prevent pension scams during transfer process

If you have preserved benefits under the Magnox Group of the Electricity Supply Pension Scheme, then you have the option of transferring them to another scheme or provider.

For instance, you may have changed employer or moved overseas and want to consolidate all of your pension savings in one place, or you may have opened a private pension.

However, transferring your pension carries significant risks. You are vulnerable to pension fraudsters and should carefully compare the benefits of your current pension with any alternatives before making a decision.

New laws introduced in November 2021 by the Department for Work and Pensions (DWP) have come into force which aim to protect you from pension transfer scams during this process.

Why the regulations have been introduced?

The new regulations are there to protect you from pension fraudsters while transferring your pension. In some cases people have lost some or all of their pension savings as part of a transfer scam..

For instance, you may have been given advice by someone who does not have appropriate permissions from the Financial Conduct Authority (FCA) or asked for the transfer after someone made unsolicited contact with you (such as a ‘cold-caller’).

In 2020, the Pensions Regulator reported that circa £30m in pension benefits had been lost to scammers in just 3 years.

What are the new rules and what they mean for you?

These new regulations mean you may have to provide additional documentation before we can transfer your benefits to an alternative pension scheme or provider of your choice.

It’s important to remember these rules have been introduced to protect you and your pension benefits and not to cause any unnecessary delays.

The new regulations have introduced a system of amber and red flags. These flags help us identify any increased risk in your application which could be part of a scam.

Amber flags will be prompted by a proposed transfer into risky investments; unclear or high charges in the receiving scheme; moving savings into an overseas pension; or many transfers into a particular scheme or involving a single adviser. If there are any amber flags, you will be referred to MoneyHelper for support and guidance before continuing with the transfer process.

Red flags will be raised if financial advice is provided by unregulated firms or individuals; if there has been unsolicited contact, for instance via a cold-caller; you have been offered incentives to transfer; or you were pressured to act quickly via a time-limited deal. If red flags are present, the Trustee can stop the transfer from going ahead.

How do the changes affect your transfer?

Depending on the type of the scheme you want to transfer to, you may need to provide additional evidence or information to help us work out whether any amber or red flags are present.

In some cases, we might need to refer you to  MoneyHelper for further support. Money Helper is a government-approved advice service, providing impartial advice on money and pensions.

In other instances, your application may be refused if it doesn’t satisfy the regulatory conditions. However there are some schemes, such as public sector pension schemes and MasterTrusts, where transfers can be approved with no additional checks..

Things to think about before you transfer

If you are thinking of transferring your benefits, you should make sure you have all of the information you need to make an informed decision.

You may benefit from independent financial advice, and in some circumstances, you may be required by law to take advice. We have added below a list of useful organisations and services who offer advice. 

moneyhelper.org.uk
Financial advice and guidance, including pensions.

unbiased.co.uk
Find independent financial advisers in your area

register.fca.org.uk
Find out whether a firm, individual or body offering pension/financial services is properly authorised with the Financial Conduct Authority. 

fca.org.uk/scamsmart
Check for known scams listed by the Financial Conduct Authority.