Whilst a lot of the recent focus from the Pensions Regulator has been to assist with the encouragement of employees to become new pensions savers via the auto-enrolment, its “Project Scorpion” against pension scams continues with helpful guidance for trustees and members.
Conflict
Some of this guidance has acknowledged the difficult position for trustees (and their administrators) when a member requests a transfer value payment to another scheme and the trustees of the transferring scheme are concerned this member may have inadvertently become subject to one of these scams.
Despite all the concerns of the increased “Scams” out there (particularly after the introduction of flexible benefits), the statutory right of a member to request a Statement of Entitlement, and then payment of a transfer, remains (albeit with the added protection of the requirement for confirmation of independent financial advice in most cases), with the applicable statutory timeframes.
Additional Duty – Due Diligence:
There is now a further duty on the trustees (usually via their administrators) to undertake a proper due diligence (guidance on this is available at www.thepensionsregulator.gov.uk/en/trustees/understanding-your-role/protect-your-members-from-scammers) regarding:
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the nature/status of the pension scheme
- description/promotion of the scheme
- the scheme member
Communication:
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Member
A key element of the guidance is communication with the member – if having undertaken some due diligence, any suspicions identified should be raised with the member. This may be part of the further queries asked to enable the due diligence to be completed and a conclusion reached.
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Regulatory
If more time may be needed to complete the due diligence, an application can be made to the Pensions Regulator for an extension of the statutory six-month transfer timeframes. This extension request will be considered in certain circumstances and if the application itself is made within the relevant timeframes.
Conclusion
The Pensions Regulator therefore seems to be recognising the very real difficulties which trustees face where the trustees’ duty is to act in the best interests of their scheme members as to determining what those best interests are. Trustees could be conflicted between having to carry out the member’s statutory request and so paying the requested transfer which could result in the loss of a member’s pension savings, or taking more time to reach a conclusion about whether there is a risk of a pension scam to the annoyance of the member.
If you need any assistance with regards to the due diligence requirements, any applications to the Pensions Regulator for an extension or indeed how to comply with any of the statutory duties when a potential scam is suspected, please contact any members of the Irwin Mitchell Pensions Team.
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