‘Really good news for pension savers' as new rules come into force

Pension saving will be undertaken by many people planning for retirement, but there could be risks involved. One of these is protecting hard-earned cash from the clutches of scammers, and it is hoped new legislation will help with this. Measures designed to protect pension savers and help stop scam transfers will come into force from tomorrow.

The new rules will mean suspicious pensions transfers can be stopped from ending up in the hands of fraudsters.

This is because pension trustees and scheme managers will secure new powers to intervene if something appears suspicious.

If warning flags arise as it comes to popular techniques utilised by con-artists, trustees and scheme managers will be able to give the transfer request a “red flag”.

Where fraud is suspected, an “amber flag” can be raised, pausing a transfer until a pension saver can prove they have taken advice on scams from the Money and Pension Service.

‘Really good news for pension savers' as new rules come into force
© Getty pension savers

The move has been widely welcomed as a step in the right direction to help Britons protect their money.

Jonathan Watts-Lay, Director at WEALTH at work, said: “Most people typically spend their entire working lives building up valuable pension savings, which is why they are such a lucrative target for fraudsters.

“The new regulations are really good news for pension savers and an important defence against scammers.

“However, whilst it might be an effective measure to help prevent pension transfer scams, there is still the issue of people needing a clear understanding of whether the pension transfer they are planning to make is suitable.

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“It is important to know and understand the risks, such as, if someone is giving up a guaranteed income, losing a protected retirement age or incurring penalties on certain investment types.”

Mr Watts-Lay highlighted many employers are now offering financial guidance and education to their workers.

This endeavour could help people in spotting the warning signs of scams and protect themselves.

However, it could also assist in helping people make an informed decision before starting a pension transfer.

‘Really good news for pension savers' as new rules come into force
© EXPRESS pension saving UK 2021

It is estimated, according to Pension Justice, that more than 1.3 million people have been targeted by unscrupulous regulated and unregulated advisors.

Many have been convinced into transferring their existing pensions to invest in unregulated, high risk and illiquid “investments”.

In some cases, people have transferred pension pots of £500,000 or more into worthless “investments” sold to them by dodgy or incompetent financial advisors who were not authorised or regulated by the Financial Conduct Authority (FCA).

Paul Higgs, solicitor at Pension Justice said: “That old adage of ‘if it sounds too good to be true, it probably is too good to be true’ couldn’t apply more than in the case of pension mis-selling.

“We’ve had clients that have been promised huge returns on unregulated investments into things such as storage pods, airport car parking spaces, fractional ownership of property in Cape Verde, carbon credits and more, which sadly have all turned out to be worthless”.

Pension Justice warns people should always be suspicious of cold calls, and check with the Financial Conduct Authority about whether a firm is regulated to provide financial advice.

Similarly, savers should always do their homework on the investments offered, and even discuss the matter with friends or family if they are unsure.

Understanding terms and conditions will be key, as will having a grasp of the full fees and charges applicable to the transfer.

Finally, if a person is advised to transfer their pension from a workplace arrangement, they should be wary, as it is unlikely this will be more beneficial elsewhere.

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