The Government has today launched its long-awaited consultation on key changes to the traffic-light transfer conditions which were introduced back in November 2021.
Adeline Chapman, partner at Sackers, commented: “The transfer conditions were designed to help curb the number of pensions savers falling victim to scams. But the traffic-light system for transfers, with “amber” flags requiring pension savers to seek guidance and “red” flags stopping the process altogether in its tracks, have posed problems in practice.
“Back in June 2023, the Government published a review into whether the regulations are ‘working effectively and giving the maximum protection for pension savers’, with feedback suggesting that certain provisions in the regulations, namely the overseas investments and incentives flags, were causing delays or preventing otherwise legitimate transfers from happening altogether.”
Chapman continued: “With the regulations already requiring trustees to assess whether the proposed receiving scheme includes investment features which might be a cause for concern (such as high‑risk or unregulated investments), the current amber flag in relation to overseas investments will be removed. This will no doubt be very much welcomed by the industry, given that overseas investments are held by many pension schemes.”
The red flag relating to incentives was also widely expected to be downgraded. But, with the Government clearly conscious that incentives and scams often go hand-in-hand, it has decided to keep this flag firmly in place. Instead, it has opted to broaden the circumstances in which trustees can go ahead with a transfer without engaging this extra level of due diligence. In future, therefore, trustees will be able to make a transfer to a scheme (even those offering some form of incentive) where they are satisfied, on the balance of probabilities, that the scheme is ‘reputable’.”
-ENDS –
