Transfers: an update

In the past couple of months, there have been two important developments in the area of pensions transfers.

Code of Good Practice for combating pension scams

In June 2019, the Pension Scams Industry Group published an updated version of its Code of Good Practice for combating pension scams.

The Code sets out suggested due diligence checks for schemes to carry out when they receive a  request to transfer to another UK scheme or to an overseas scheme.  It includes, for example:

• an analysis process that schemes can use to decide what level of due diligence to apply;
• a step by step description of the due diligence checks that schemes should apply;
• guidance on what to do if you decide that a transfer should not proceed;
• example letters to members, HMRC and receiving schemes;
• an example discharge form;
• guidance on using the Action Fraud Expert reporting tool; and
• example case studies.

The updated version of the code is relevant to all transfer requests processed on or after 10 June 2019.  It is designed to be used alongside guidance published by the Pensions Regulator and others, and is not intended to be a substitute for legal advice.  Trustees will still need to seek legal advice if they have concerns about a particular transfer.

Good practice guide for transfers

In July 2019, the Pensions Administration Standards Association published the first of two good practice guides for transfers.

The aim of the guides is to “improve the overall member experience through faster, safer transfers; improve efficiency for administrators; [and] improve communications and transparency in the processing of transfers”.  They are aimed at DB schemes,  but PASA “encourages applying best practice principles across different types of work or business areas”.

The guide issued in July covers what it defines as ‘straightforward or standard’ cases. A second guide, due to be released later this year, will cover more complex cases.  More complex cases are expected to include cases needing significant manual intervention (where calculation of the transfer value is not fully or substantially automated), partial transfers, non-statutory transfers, transfers overseas and cases where a pension scam is suspected.

The first guide breaks a transfer down into stages and confirms good practice steps and timelines for each stage. It introduces a ‘transfer template’, designed to help schemes to provide financial advisers with the information they will need to give good quality advice to the member.  It also includes a template letter to members and a checklist to help members to supply everything the scheme will need to process the transfer.

Compliance with the guide is voluntary.  However, in practice, PASA expects the Pensions Ombudsman to refer to it when considering member complaints.

Open Trustees comment

Trustees will want to discuss the Code of Good practice for combating pension scams with their scheme administrators and agree how the Code, and the template documents included within it, will be used to make sure the scheme is meeting industry standards in relation to transfers.

Trustees will also want to discuss the Good practice guide for ‘standard’ transfers with their scheme administrators and agree how to make use of the guide and related template documents.

30 July 2019