Delays in the pension transfer process are leaving financial advisers with frustrated clients. While the Pension Transfer Protocol was introduced to improve customer experience and ensure that all transfers are carried out in a timely manner, some advisers are still experiencing long wait times. Here, we explore some of the reasons behind these delays and discuss the process.

If a rules review is not complete by summer 2023, it will continue to be “a frustrating period”.

The trade press has been filled with articles quoting frustrated advisers at the delays to their clients’ pension transfers unless you have been living under a rock. Since the Department for Work and Pensions (DWP) implemented new anti-scam rules in November 2021, these complaints seem to have spiked.

A number of these concerns have been addressed by the Pensions Regulator and the Department for Work and Pensions. In case of a ‘red flag’, a ceding scheme trustee could pause or even block a pension transfer under the new rules, replacing the former statutory right to transfer.

In addition, they may raise an ‘amber flag’ if they suspect their client is at risk of being scammed. A member who requests to transfer money will have to provide evidence that he or she has taken specific anti-scam guidance from the Money and Pensions Service (MaPS) over the phone.

This has resulted in many transfers being delayed

According to the UK government, it may amend the rules so that low-risk overseas investments will no longer be flagged. To address these concerns, the pensions regulator (TPR) updated its transfer request guidance.

Neither the regulations nor their implementation should impose additional burdens on schemes, and administrators or have an impact on standard business practices.

On a case-by-case basis, trustees can use the regulator’s new guidance to maintain a clean list of low-risk pension schemes, which can be used to oversee some transfers without onerous administrative burdens. Due diligence analysis of such records allows trustees to maintain a smooth transfer process without having to conduct additional checks in order to move forward normally.

In a joint statement, the TPR and DWP also recommended that transfers causing no concern – which should be the vast majority of cases – should be handled without further action.

In this update, red flag three is probably of the greatest concern for overseas advisers – performing regulated activities without the necessary FCA permission to:

• Advise clients on pension transfers;
• Assist them in investing their pension; and
• Making arrangements for the member to buy or sell investments or making arrangements with a view to the member buying or selling investments.

When their client wishes to transfer a scheme with safeguarded benefits over £30,000 ($36,6535, €35,930), many overseas-regulated advisers work with FCA-regulated financial advisers.

In order to provide a pension transfer report that allows such a transfer to be completed smoothly, a UK partner firm will provide evidence of the necessary permissions for a ceding defined benefit scheme.

Uncertainty

However, due to the new guidance’s continued ambiguity, overseas advisers may face a difficult road ahead when advising clients on UK money purchase scheme switches to other UK money purchase schemes, for example, SIPPs.

This is due to the possibility that the ceding schemes will interpret the requirement for a UK-regulated adviser to be involved in the advice process and, in the absence of such evidence, will raise a red flag. Fortunately, SJB Global is positioned where this is a possible solution for clients if the situation doesn’t improve.

In essence, trustees can grant a ‘discretionary transfer’ where their scheme rules allow it where they believe the regulations read as if there is no statutory right to transfer but conclude following due diligence that the transfer is a low risk of a scam.

Here at SJB Global, we will seek to educate clients on some of the unique challenges that many non-UK resident clients face when seeking advice, with the hope they will not be required to pay higher advice fees than their UK resident peers.

It remains to be seen how this will play out in practice. However, if nothing changes soon, advisers may face another frustrating period until the promised review is completed by the summer of 2023.

We hope this article has helped to explain some of the reasons behind delays in the pension transfer process. If you have any further questions or want assistance with your pension transfer, please don’t hesitate to contact SJB GLOBAL. Our team of experts is ready and waiting to help you achieve a stress-free pension transfer.