Low risk pension transfers needlessly halted due to weakness in new rules

autumn statement

New Freedom of Information (FOI) data from the Money and Pensions Service (MaPS) gathered by wealth manager, Quilter, reveals an acceleration in the number of MaPS scam guidance sessions following new pension transfer rules introduced in November 2021, but indicates amber flags are being raised on potentially low-risk transfers relating to overseas investments.

The new MaPS data shows that overseas investments were the most common cause of an ‘amber flag’ being raised by the trustees of a transferring pension scheme. This was given as the reason in almost 40% of recorded cases, resulting in at least 134 pension transfers being put on hold for this reason to the end March 2022.

The figures likely show just a small representation of a much wider issue, as MaPS only keeps a record where the member is given the details of the amber flag by the transferring scheme. Due to the limited data just 348 amber flags detail why it had been raised and why the guidance was necessary.

Due to the very broad way in which the rules are worded, some pension schemes are raising amber flags on overseas investments covering mainstream investments, such as funds from major asset managers that are investing globally.

The second most common cause was high risk or unregulated investments, which saw just 81 transfers paused in the same timeframe.


MaPS scam guidance sessions received












Reason for amber flag

No. raised

Overseas investments

134 (39%)

High risk/unregulated investments

81 (23%)

Unclear/high fees

55 (16%)

Complex investment structure

45 (13%)

High volume to same scheme

15 (4%)

Evidence provided not genuine

13 (4%)

High volume with same financial adviser

5 (1%)

The new pension transfer rules introduced in November 2021 require the trustees of a transferring pension to raise an amber flag, which pauses a pension transfer, if they find that there are overseas investments included in the receiving scheme or other relevant issues. Before the transfer can be authorised, the member involved must prove they have received scam guidance from the MaPS following the transfer being flagged.

Since the introduction of the new transfer rules, a total of 856 members have received scam guidance from the Money and Pensions Service as a result of an amber flag being raised by a trustee (to March 2022). Month on month, the number of amber flags raised have increased significantly, leaping from just 20 guidance sessions in December 2021 to 505 in March 2022.

This new data may evidence previous concerns raised to the Department for Work and Pensions, which told the parliamentary joint committee on statutory instruments that officials had been notified of a potential problem involving too many pension transfers being given an amber flag.

Jon Greer, head of retirement policy at Quilter said:

“In the 12 months to 31 November 2021, the Money and Pensions Service took just 482 calls and webchats in relation to pensions scams. Comparatively, in the four months that followed the introduction of the new pension rules, this figure nearly doubled to 856. 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.

 “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 because the new scheme offers overseas investment included in the receiving scheme – as is the case in many UK registered pension schemes. There is a clear divergence between policy intention and the practical application of the law.

 “Whilst it is early days the concern is that the number of referrals is increasing at a rapid rate. I fear a material proportion of people may be being required to take scam guidance sessions unnecessarily at a time when the ‘stronger nudge’ to pensions guidance comes into force. We hope the stronger nudge will result in an increase in the number of Pension Wise sessions being taken up, but what we don’t need is referrals to MaPS scams guidance where the member’s experience is that it was an entirely pointless exercise.

 “What’s more, the lack of information provided to MaPS in terms of the reason for the amber flag being raised is concerning. If the information is not logged, and particularly whether there was 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.

 “The drafting of the rules is not specific enough in its definition of overseas investments, which make no distinction between overseas investments that present a scam risk as opposed to those that don’t. This appears to be resulting in pension savers being forced to take MaPS guidance before they are able to make a low risk transfer. The DWP has previously stated that the amber flag regulations were not intended to encompass low risk transfers and said it was actively engaging with industry representatives and considering amending the regulations.

 “While this is a welcome step, we hope that they address this well within the current 18-month review period it committed to at the commencement of the regulations.”

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