The government had committed to publish a review of the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 (the regulations that introduced the red, amber and green flags systems for members interested in taking a transfer) within 18 months of the regulations coming into force (i.e. by the end of May 2023). The object of the review was to determine whether the Transfer Value Regulations remain appropriate/effective in targeting pension scams and whether they give rise to unintended consequences.
What were the results?
After a small delay, the results of this review have been published, with the DWP concluding that it will conduct further work with the pensions industry and the Pensions Regulator to consider if changes could be implemented to the regulations to improve the pension transfer experience but without undermining the policy intent.
To give some context to the conclusion, based on the data gathered (from over pension schemes, administrators and industry bodies), the government estimated that, from 290,000 transfers, only 1% (i.e. 2,900 transfers) had a red or amber flag present (i.e. flags which could have prevented or at least delayed a transfer). Moreover, 2,400 of those were amber flags.
This leads the government to believe that:
- the low percentage of transfers with a red or amber flag (1%) indicates there has not been a disproportionate cost to business following the implementation of the regulations,
- while data suggests that the regulations have not significantly lengthened transfer times, the increase in waiting times for a Money and Pensions Service (MaPS) pension safeguarding appointment may have potential costs, and,
- the original policy intent of the regulations remains appropriate.
It is disappointing that no specific proposals have been made to address issues such as overseas investments (where delays in transfers can occur simply because a member’s transfer will be invested in a pooled fund which may include such assets) and incentives (where otherwise legitimate marketing strategies can prevent a member from transferring).
That said, given the pensions industry’s concerns on the application of the regulations (particularly, the incentives and overseas investment flags), the DWP will conduct further work to consider if changes could be implemented to improve the pension transfer experience but without undermining the policy intent. Any changes are though unlikely to take effect before next year.
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