Pension Schemes Act 2021 gives trustees power in the fight against pension scams
What you need to know
- Until now, all members of defined benefit pension schemes who are more than a year away from their normal retirement age have broadly had an automatic statutory right to a transfer value.
- The Pension Schemes Act 2021 (the Act) imposes conditions on this statutory right, intended to combat the rise in pension scams.
- The conditions themselves are yet to come into effect as they need to be introduced by secondary legislation. The Act suggests conditions related to employment or place of residence, although it does not restrict them to those areas.
- The Department for Work and Pensions (DWP) is currently drafting the legislation to introduce these conditions, focussing on the key red flags that indicate a scam and are possible to regulate. A consultation is expected shortly, with legislation expected to come into force in autumn 2021. From this point, trustees will be able to block transfers which satisfy the conditions.
- These developments are a positive step in the fight against pension scams. Trustees will need to ensure their processes are sufficient to implement these conditions.
Actions you can take
- Be aware of the possible legislative changes around transfer values, intended to combat pension scams.
- Review your scam identification procedures to ensure that they will be able to spot the conditions that might be included in forthcoming legislation.
- Update your communications to ensure members are aware of the conditions for a transfer to proceed.
- Consider helping your members to access high-quality financial advice to reduce the likelihood of members failing these conditions at the point of transfer.
The key causes of red flags in 2020
For further information, please get in touch with Mark Barlow or Helen Ross or speak to your usual XPS contact.