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New anti-scam measures need proper resourcing

New rules designed to protect people who transfer their pensions from scammers will come into force next week (30th November), but a recent Parliamentary answer from the pensions minister has raised concerns about capacity in the new system according to Daniel Jacobson, a senior consultant at LCP.

The new rules were published less than three weeks ago (8th November – New measures to protect pension savers from scam transfers – GOV.UK (www.gov.uk)) but trustees will be expected to implement them by the end of this month. As part of this process, every transfer will be checked to see if it falls foul of a ‘red flag’, which would raise enough concern to remove the statutory right to transfer, or an ‘amber flag’ which indicates a potential area of concern. Where an amber flag is present, trustees can refer the member to a ‘scam protection’ interview with MoneyHelper, and only on completion of that interview does the scheme have to continue with the transfer.

However, a recent Parliamentary answer to a question tabled by Wendy Chamberlain MP gave little indication that DWP is prepared if a large volume of cases are referred once the system is up and running. The full question and answer is below:

To ask the Secretary of State for Work and Pensions, pursuant to the announcement of 8 November 2021 on preventing pension scams, what estimate she has made of the impact on the number of referrals to MoneyHelper for mandatory guidance once the new rules come into force; and whether additional resources have been allocated to MoneyHelper for that purpose. (72597)

Guy Opperman:
The legislation will fully come into force on the 30 November. We anticipate that accurate data will become available after this point. It is the Departments intention to monitor the volumes of referrals to MoneyHelper and include this in the review of the regulations I have committed to carry out within 18 months of them coming into force having worked closely with the Money and Pension Service.
The answer was submitted on 16 Nov 2021 at 15:52.

What is unclear at this stage is how pension scheme trustees and pension providers will respond to the new rules.  If trustees (and their administrators) opt for an ultra-cautious approach of categorising large numbers of transfers as raising ‘amber flags’ there is a risk that MoneyHelper could be overwhelmed by demand, leading to delays in obtaining appointments and delays in transfers.

Commenting, Daniel Jacobson of LCP said:

“The new rules have been brought forward with the best of intentions but there has been very little time for schemes to prepare, and volumes of referrals to the new anti-scam interviews are highly uncertain. Unless schemes apply appropriate due diligence, rather than simply deciding to automatically refer most cases to Moneyhelper there is a risk that large volumes of referrals could overwhelm the service and lead to delays and frustration. Whilst trustees and administrators should not view referring a case to Moneyhelper as the default course of action, the Government must also ensure that there is capacity in place to ensure that those genuine referrals can be dealt with swiftly and efficiently and that it doesn’t become a bottleneck”.

The office of Wendy Chamberlain MP have provided an additional comment:

“The Minister’s reply offers little reassurance that proper preparations have been made by the Government for these new measures. A review in 18 months will be of little use if people struggle to transfer their money now because they cannot access an anti-scam interview because of a capacity crunch”.

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