Pensions Regulator acts to warn trustees over transfer activity

According to a report in the Financial Times, the regulators have written to companies in the process of merging including J Sainsbury and Asda, as well as those where there has been a spike in transfer activity.

TPR said it was generally not in a saver’s best interest to transfer out of a defined benefit (DB) scheme. The letters follow a review last year which found that less than half of the advice given to members of DB schemes about transferring their pensions was suitable.

Pensions transfers are also under scrutiny in the wake of the restructuring of Tata Steel, as it emerged that thousands of members of the British Steel Pension Scheme based in Port Talbot lost considerable sums of money after transferring their funds out of the scheme after receiving unsuitable advice. Those transfers have been the subject of a review by the FCA and an inquiry by the House of Commons Work and Pensions Committee.

“It is good to see some proactive regulatory intervention after what happened at Port Talbot and what could be the start of the next big pensions mis-selling scandal,” said pensions litigation expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law.com.

“Trustees are not in a position to judge the quality of the advice received by members looking to transfer out of defined benefit schemes – they merely have to check advice has been given by an FCA-authorised adviser.  However, this approach by the regulators should increase awareness of trustees of these large schemes at least to watching out for suspicious patterns of increased transfer activity or repeated use of certain financial advisers,” Fairhead said.

Last week the Pensions Scam Industry Group published an updated code of practice for pensions providers and trustees, which includes additional guidance on transfers. Fairhead said the code emphasised that it was critical for trustees to communicate early with members to flag the risks of unscrupulous advisers. 

“Regulatory publicity around this is essential to ensure there is a strong independent message, as trustees are often portrayed by scammers as having a vested interest in trying to retain members’ pensions – all part of the entrapment of the scam victim,” Fairhead said.

It emerged recently that insurers were now less willing to insure financial advisers giving pensions transfer advice, which is required for anyone with more than £30,000 in their pension scheme.

Analysis by consulting firm Mercer in June 2017 showed that 210,000 DB members had transferred a combined total of about £50 billion out of their pension schemes since 2015. That was when the government brought in new rules allowing DB members to access pension funds once they turn 55, without incurring a tax penalty or having to buy an annuity.