I have recently changed companies and want to transfer my work pension to my new employer’s provider, a large well-known insurance firm.
When I last transferred a different pension to the old provider, which I now wish to leave, it was done with no issues.
I have initiated a request, but this same provider wants signed declarations wanting to know my pension plans and to know if it’s high risk, plus they want (preferably) photographic ID to be sent to them.
I have declined as I think their questions are intrusive.
I understand some requirement for this, if it was suspicious for instance. But why are they asking for this when I’m planning to move my pension to a legitimate company, and more importantly, do I have to follow the request?
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Moving a pension: I’m being asked intrusive questions about a transfer to a legitimate firm
Steve Webb replies: Your pension transfer request has been caught by rules designed to protect people from scams.
As I’m sure you know, far too many people have transferred pension money into different arrangements only to find out that they perform poorly, cost a lot in charges or are outright frauds.
These new rules are designed to protect people from such risks.
Note that we are talking here about transferring a ‘pot of money’ type pension, and that more comprehensive rules apply to people wanting to transfer out of old-style salary-related pensions.
What are the rules on pension transfers?
Until November 2021, pension trustees such as those looking after your old workplace pension had no power to block pension transfers, even if they were seriously concerned that the money was going to somewhere that looked pretty dodgy.
This may be why your previous transfer went through smoothly.
What changed in late 2021 is that, before a transfer goes ahead, the scheme that holds the money has to make certain checks. Your old company pension provider is not being ‘nosy’, it’s following the process that has been set down.
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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 authorised master trust.
I will however come back 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 that the new rules work is that the details of your transfer request can trigger two levels of warning:
– A ‘red flag’, in which case the trustees can block the transfer altogether;
– An ‘amber flag’, in which case you would have to take part in what’s called a ‘Pension Safeguarding Guidance’ conversation with MoneyHelper (see the box below) before the transfer could proceed.
The main items on the red flag list, which raise serious concerns, include:
– The transfer was prompted by an unsolicited ‘cold call’;
– The member reports feeling under pressure to transfer;
– They are being offered some sort of ‘incentive’ to transfer.
If one of these red flag items shows up in response to the scheme’s questions, the trustees may take the view that there is a high risk of a scam and therefore refuse to carry out the transfer.
There is a longer list of items which may raise some concern, and come under the amber flag category. These include:
What is MoneyHelper?
MoneyHelper is a free, impartial and safe guidance service which any member of the public can consult about their finances, writes This is Money.
It is an arms-length body of the Government, which funds it.
MoneyHelper’s website has a lot of easily searchable information and guides, or you can telephone, use webchat (or WhatsApp for some things) or send an enquiry via an online form to their staff.
It says: ‘Our trained staff can help work out what’s right for you. Whatever your query, we’re here to help. If we don’t know the answer, we’ll point you in the right direction of someone who does.’
– The receiving scheme invests in ‘high risk’ or unregulated investments;
– Fees in the receiving scheme are ‘high’ or unclear;
– The investment structure in the receiving scheme is ‘unclear, complex or unorthodox’;
– There are overseas investments in the receiving scheme;
– The transfer request is similar to a sudden cluster of others to the same destination scheme.
In addition, an amber flag can be triggered if you are transferring to an occupational pension scheme but don’t appear to have an employment relationship associated with the new scheme, or where you don’t satisfy the rules around residency.
How are the new rules working in practice?
The Government’s view was that the vast majority of transfers would sail through this process and that relatively few people would be held up or required to have a conversation with MoneyHelper about scams.
However, trustees (and their legal advisers) have taken a more cautious view. For example, given that pension funds are usually invested globally, the amber flag for ‘overseas investments in the receiving scheme’ can be triggered on a regular basis.
The Government assumed that pension schemes would quickly develop a ‘safe list’ of providers (such as the household name insurer to which you are transferring) who had a low scam risk and would nod through such transfers.
But if one of those transfers did go wrong, the trustees would then be potentially liable because they didn’t apply the red flag/amber flag process that was available to them. Not surprisingly, trustees have chosen to err on the side of caution.
If you decline to answer then this is likely to raise concerns with the trustees and they could then block the transfer
There is still something of a standoff around this issue between the Government, which thinks that pension providers are being over-zealous, and pension schemes and trustees which don’t want to risk being sued if things go wrong.
Hopefully at some point a common-sense solution will be found, but for now the transfer system is somewhat gummed up as a result of these well-meaning regulations.
You ask if you are obliged to answer these questions, and the answer is ‘no’ – but if you decline to answer then this is likely to raise concerns with the trustees and they could then block the transfer in any case.
You can read more about the measures to protect people against scams on MoneyHelper’s website.
