It comes after the Department for Work and Pensions (DWP) told the parliamentary joint committee on statutory instruments that officials had been notified of a potential problem involving too many pension transfers being given an ‘amber flag’.
New transfer rules introduced in November 2021 require the trustees of a transferring pension to find an amber flag – which pauses a transfer – if they decide that there are overseas investments included in the receiving scheme. The member involved in the flagged transfer must then prove that they have taken scam guidance from the Money and Pensions Service (MaPS) before the transfer can be authorised. Trustees are also required to block a transfer if they identify a ‘red flag’.
The joint committee previously warned that, since most schemes include overseas investments, the amber flag rules could result in a high number of pension savers being forced to take MaPS guidance before making low risk transfers. The DWP told the committee that the amber flag regulations were not intended to encompass low risk transfers and said it was actively engaging with industry representatives and considering amending the regulations.
But Ben Fairhead, pensions litigation expert at Pinsent Masons, warned that fixing the issue could take time. He said: “The solution might lie in making it clearer within the regulations that transfers to schemes on ‘green lists’ should be exempt from the more detailed red and amber flag regime. It is…
