Nearly half (44 per cent) of scam guidance sessions in the past three months have been triggered despite the Money and Pensions Service not knowing why the amber flag was raised to begin with, according to data obtained via freedom of information act request by Quilter.
Rules introduced in November 2021 require trustees of a transferring pension to raise an amber flag — which pauses a transfer — where certain conditions are met, such as when there are overseas investments included in the receiving scheme. The member involved must then prove they have taken scams guidance from MaPS before the transfer can proceed.
The rules have been criticised for their broad wording, leading to arguments within the industry, such as when PensionBee reported a number of providers to the Department for Work and Pensions for allegedly exploiting the rules to unnecessarily delay transfers.
Some 3,731 members have received guidance from MaPS as a result of amber flags since the introduction of the rules in 2021, and Quilter noted that the number is increasing “significantly” month on month, jumping to 1,067 guidance sessions in June 2022 from just 20 in December 2021; though it noted that the rate of growth would appear to be slowing.
The 44 per cent of cases between April and June 2022 where “unknown” was listed as the cause amounted to 1,266 out of a total of 2,875 amber flags, while overseas investments likewise prompted a disproportionate number — 1,032 — leading to fears that many low-risk pension transfers are nevertheless being put on hold.
Quilter warned that the “broad” way the rules around amber flags are worded is leading to schemes flagging overseas investments that are in fact safe and mainstream, such as funds from major asset managers that are investing globally.
Additionally, MaPS said the true figure for flags with “unknown” causes could in fact be higher than listed, and Quilter warned that the service does not appear to be improving the quality of the data collected, the FOI response stating MaPS “[does] not enter into correspondence with members, schemes or providers about the reason for the amber flag”.
Quilter’s head of retirement policy, Jon Greer, said: “In the 12 months to November 31 2021, the Money and Pensions Service took just 482 calls and webchats in relation to pensions scams. Comparatively, in the seven months that followed the introduction of the new pension rules, this number soared to 3,731.
"This highlights the real disconnect between the number of people whose pension transfers were potentially being targeted by a scam, versus the number of people who were able to identify this and reach out for help prior to the rule change.
“However, while it is positive to see such a noted increase in the number of people receiving scam guidance when it comes to their pension transfers — particularly where there is a genuine cause for concern — there remains a clear issue with transfers being halted where the trustees are finding an amber flag, but MaPS is not being made aware of the reason.”
He said the lack of information being provided to MaPS pertaining to the reasons amber flags are raised “is concerning”. If the information is not logged, especially where there is an actual risk of a scam, “it will be difficult to assess where scams are focusing and may provide an inaccurate picture of the effectiveness of the regulation”, he observed.
