Why am I dealing with an intrusive probe simply to switch a pension?

I’ve not too long ago modified firms and need to switch my work pension to my new employer’s supplier, a big well-known insurance coverage agency.

When I final transferred a special pension to the outdated supplier, which I now want to go away, it was achieved with no points.

I’ve initiated a request, however this similar supplier needs signed declarations desirous to know my pension plans and to know if it is excessive danger, plus they need (ideally) photographic ID to be despatched to them.

I’ve declined as I believe their questions are intrusive.

 I perceive some requirement for this, if it was suspicious as an example. But why are they asking for this when I’m planning to maneuver my pension to a professional firm, and extra importantly, do I’ve to comply with the request?

SCROLL DOWN TO FIND OUT HOW TO ASK STEVE YOUR PENSION QUESTION

Steve Webb replies: Your pension switch request has been caught by guidelines designed to guard folks from scams.

As I’m certain you recognize, far too many individuals have transferred pension cash into totally different preparations solely to search out out that they carry out poorly, value quite a bit in costs or are outright frauds.

These new guidelines are designed to guard folks from such dangers.

Note that we’re speaking right here about transferring a ‘pot of cash’ sort pension, and that extra complete guidelines apply to folks desirous to switch out of old-style salary-related pensions.

What are the foundations on pension transfers?

Until November 2021, pension trustees corresponding to these taking care of your outdated office pension had no energy to dam pension transfers, even when they have been severely involved that the cash was going to someplace that appeared fairly dodgy.

This could also be why your earlier switch went by way of easily.

What modified in late 2021 is that, earlier than a switch goes forward, the scheme that holds the cash has to make sure checks. Your outdated firm pension supplier is just not being ‘nosy’, it is following the method that has been set down.

The solely exceptions to those necessities are the place the scheme you might be transferring to is a public sector scheme or an authorised grasp belief.

I’ll nonetheless come again to your level about the truth that you might be transferring to a well known and revered insurance coverage firm with – presumably – a really low danger of being scammed.

The means that the brand new guidelines work is that the main points of your switch request can set off two ranges of warning:

– A ‘purple flag’, wherein case the trustees can block the switch altogether;

– An ‘amber flag’, wherein case you would need to participate in what’s known as a ‘Pension Safeguarding Guidance’ dialog with MoneyHelper (see the field beneath) earlier than the switch might proceed.

The important objects on the purple flag checklist, which increase critical considerations, embrace:

– The switch was prompted by an unsolicited ‘chilly name’;

– The member experiences feeling underneath strain to switch;

– They are being provided some kind of ‘incentive’ to switch.

If one in every of these purple flag objects exhibits up in response to the scheme’s questions, the trustees could take the view that there’s a excessive danger of a rip-off and subsequently refuse to hold out the switch.

There is an extended checklist of things which can increase some concern, and are available underneath the amber flag class. These embrace:

– The receiving scheme invests in ‘excessive danger’ or unregulated investments;

– Fees within the receiving scheme are ‘excessive’ or unclear;

– The funding construction within the receiving scheme is ‘unclear, complicated or unorthodox’;

– There are abroad investments within the receiving scheme;

– The switch request is much like a sudden cluster of others to the identical vacation spot scheme.

In addition, an amber flag could be triggered if you’re transferring to an occupational pension scheme however do not seem to have an employment relationship related to the brand new scheme, or the place you do not fulfill the foundations round residency.

How are the brand new guidelines working in follow?

The Government’s view was that the overwhelming majority of transfers would sail by way of this course of and that comparatively few folks can be held up or required to have a dialog with MoneyHelper about scams.

However, trustees (and their authorized advisers) have taken a extra cautious view. For instance, on condition that pension funds are normally invested globally, the amber flag for ‘abroad investments within the receiving scheme’ could be triggered frequently.

The Government assumed that pension schemes would rapidly develop a ‘protected checklist’ of suppliers (such because the family title insurer to which you might be transferring) who had a low rip-off danger and would nod by way of such transfers.

But if a type of transfers did go fallacious, the trustees would then be probably liable as a result of they did not apply the purple flag/amber flag course of that was accessible to them. Not surprisingly, trustees have chosen to err on the facet of warning.

There continues to be one thing of a standoff round this challenge between the Government, which thinks that pension suppliers are being over-zealous, and pension schemes and trustees which do not need to danger being sued if issues go fallacious.

Hopefully sooner or later a common sense resolution will probably be discovered, however for now the switch system is considerably gummed up on account of these well-meaning laws.

You ask if you’re obliged to reply these questions, and the reply is ‘no’ – however in the event you decline to reply then that is more likely to increase considerations with the trustees they usually might then block the switch in any case.

You can learn extra in regards to the measures to defend folks towards scams on MoneyHelper’s web site.