- Quilter’s three key asks of the DWP’s review
30 May marks 18 months on from the introduction of the new pension transfer regulations, meaning the Department for Work and Pensions’ (DWP) self-imposed deadline for its highly anticipated review is fast approaching. New freedom of information (FOI) data from the Money and Pensions Service (MaPS) gathered by wealth manager, Quilter, reveals just how vital it is that the DWP gets it right.
The latest MaPS data reveals that the challenges faced since the introduction of the new regulations have persisted, with four out of five (80%) of all amber flags raised due to an unknown reason or for a potentially low risk transfer relating to overseas investments.
Of the 13,927 MoneyHelper Pension Safeguarding Guidance (PSG) sessions that were conducted since the regulations were introduced in November 2021, nearly half (43% or 6,050) were conducted for an ‘unknown’ reason, while almost two in five (37% or 5,154) were conducted after a flag was raised on potentially low-risk transfers relating to overseas investments.
|Reason for amber flag||Number of amber flags raised (Dec 21-March 2023)|
|Complex investment structure||322|
|Evidence provided is not genuine||168|
|High risk/unregulated investments||689|
|High volume to the same scheme||74|
|High volume with the same financial adviser||60|
|Month||Number of PSG appointments|
Since the introduction of the regulations, MaPS has faced increasing pressure on its services due to a large number of people requiring guidance appointments, many of which are potentially being conducted unnecessarily. It is positive that the regulations mean many people have potentially been saved from fraudsters, but the delay in correcting the drafting of the regulations is problematic and creating more delays than the numbers of people attending scam sessions suggest.
At present, the DWP’s rules are not specific enough and have led to an increasing number of pension savers being forced to take guidance before they are able to make even a low-risk transfer which risks wasting vital resource. The high number of amber flags has also seen an increase in delays in the facilitation of pension transfers by administrators, as well as issues booking a MoneyHelper guidance session in a timely manner. These problems have caused undue stress for customers and advisers alike.
What’s more, the high percentage of ‘unknowns’ highlights the fact that there is a real lack of detail with regards to the reason for an amber flag being raised which has led to difficulties in assessing how effective the regulations are. MaPS previously confirmed it proactively gathers information from the customer on the reason for an amber flag, but the consistently large number of ‘unknowns’ suggests a lack of information being provided to members by pension schemes when an amber flag is raised.
Quilter has three key asks of the DWP to help ensure it goes far enough in putting right these ongoing issues to prevent further waste of resource and to ensure customer protection.
Jon Greer, head of retirement policy at Quilter, sets out these asks below:
“It has been 18 months since the pension transfer regulations were introduced in November 2021, and it is time the DWP sets out its next steps to ensure the bumps that have appeared are ironed out.
“Since Quilter’s initial FOI request to MaPS revealed a large number of potentially low risk transfers relating to overseas investments were being needlessly halted, we have continuously called on the DWP to act to put the issues right. While we are disappointed the review has not come sooner, we look forward to the report which is due from the DWP by the 30 May. So with just a few weeks to go Quilter is calling on the DWP to ensure three key problems are resolved.
“Firstly, Quilter asks that the DWP provides absolute clarity through an update to the very broad way in which the rules are worded, particularly in relation to its definition of overseas investments. The current drafting makes no distinction between overseas investments that prevent a scam risk as opposed to those that do not, and at present there is a clear divergence between policy intention and the practical application of the law. The DWP and TPR’s previous joint statement which attempted to resolve this did little to help, so it is vital the DWP goes one step further by amending the legislation to ensure consistency and reduce unnecessary delays to low-risk pension transfers.
“Secondly, Quilter asks that the DWP makes it an explicit legislative requirement for all pension schemes to provide clear and accurate information to customers on the reason an amber flag has been raised. The high percentage of ‘unknowns’ in the last 18 months amount to ineffective data collection which leaves a real gap in our understanding of how effective the rules have been. This gap also highlights the potential for increased customer disengagement and frustration if they are not clear on the reason as to why their pension transfer has been delayed. Putting the onus on pension schemes to provide clarity could significantly improve this.
“Finally, we’d like to see the level of resource available for MaPS guidance sessions bolstered to ensure customers are seen within a reasonable timeframe. We are aware at times that customers have had to wait a month before the earliest appointment is available. Not only will this help reduce pension transfer times and boost overall efficiency, but it would also mitigate the level of undue stress customers and advisers are experiencing.
“Pensions savers and their advisers have faced major delays and undue troubles in the past 18 months, and much of this can be attributed to the time taken to review the regulations. It is vital that real change is enacted to ensure a considerably improved process going forward.”