The new regulations introduce a system of ‘red and amber’ flags in order to prevent people losing their pensions to pension scammers. If an amber flag is deemed to be present, the ceding scheme will require the member to receive guidance from MoneyHelper (the new UK government helpline), following which the transfer will usually be allowed to proceed. If a red flag is deemed to be present, the trustees must decline the transfer.

Amber flags include the presence of overseas investments and high or unclear charges.

Red flags, which are far more serious, include:

• Failure to provide the required information to the scheme

• Failure to provide evidence of receiving MoneyHelper guidance

• Someone carrying out a regulated activity without the right regulatory status

• The member requesting a transfer after being ‘cold-called’

• The member being offered an ‘incentive’ to make the transfer.

• The member having been pressured to make the transfer


Transfers to an overseas scheme - a Recognised Overseas Pension Scheme (ROPS) - have an additional layer of checks. Unless the transfer is to an employer’s scheme, the member must provide evidence that he is resident in the same country as the one in which the overseas scheme is established (the ‘residency test’). There is a difference of opinion among trustees as to whether failing the residency test is a red or amber flag. The Government has confirmed that their intention is for these regulations to be reviewed within 18 months and we await further clarification on this issue.

What does this mean for the pension member?

Amber flags

The presence of any amber flag means that the transfer process will be slowed down considerably. Whilst transfer requests must normally be processed within six months, it is not unusual for some transfers to take a year or more. Whilst it is encouraging to see new provisions in place to prevent pension scams, the new regulations will undoubtedly slow down genuine pension transfer requests.

Red flags

A much more serious result would be the presence of a red flag which would mean that the transfer would be declined. Whilst there is an appeal process, there would be no guarantee that the transfer will be allowed to continue. The critical issue here is the following statement from the UK Pensions Regulator which gives the following guidance to trustees:

“Your decision on whether to refuse a transfer should be based on the balance of probabilities. This means you conclude that you have a reasonable foundation, on all the evidence and information available, that there is a red flag present. It is not necessary to prove this conclusively.”

Whilst an amber flag would slow the process down, it is vital that you do not enter into any arrangement that would generate a red flag.

It would therefore be wise for anyone considering a transfer to any other arrangement, whether to a ROPS or to another UK scheme, to seek professional advice. Here at Blacktower, we would be happy to assist you.

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