Suspect pension transfers could be blocked or paused by a system of “flags” under plans to clamp down on scammers.
nder proposals from the Department for Work and Pensions (DWP), requests could be stopped, for example, if savers have been approached to access or transfer their savings uninvited by social media.
Such unsolicited contact would trigger a flag, which would mean pension trustees or scheme managers could block it.
Red or amber flags would allow pension transfers to be prevented or paused while the saver takes guidance about the possibility of scams.
Flags could also be raised depending on responses to questions such as whether people’s investments are subject to exit penalties or whether they know about charges for their new pension arrangements.
Pension scammers are the lowest of the low, and with the growth in recent years of online scams we must act now to curb themMinister for Pensions Guy Opperman
Many scammers are using social media and other online channels to offer people too good to be true incentives such as free pension reviews, early access to their money, or time-limited offers, the Government said.
Lured by these attractive offers, people are coerced into transferring their savings into a scam scheme.
Minister for pensions Guy Opperman said: “Pension scammers are the lowest of the low, and with the growth in recent years of online scams we must act now to curb them.
“Our new regulations will build a strong first line of defence in the fight against pension fraud – helping stop these crooks from making off with people’s hard-earned savings.”
While most pension transfers are legitimate, the Pension Scams Industry Group estimates 5% of transfer requests give trustees and scheme managers cause for concern.
A consultation on draft regulations is available on gov.uk and is open for responses until June 9.
Phil Brown, director of policy at B&CE, provider of the People’s Pension, said: “We welcome the Government’s consultation on introducing a red flag system for pension transfers, a move that would give the industry greater powers to tackle pension fraud, which is the cruellest of all financial crimes.”
Andy Bell, chief executive of AJ Bell, said some firms may take a blanket risk-averse approach which could hit consumers.
He said: “We need some pragmatism from DWP to ensure customers are not harmed by these overzealous proposals.
“It is clearly not in anyone’s interests to clog up the transfer market or create barriers to savers switching providers and benefiting from lower charges or better service.”