I’m unlikely to be clinging to the side of an aircraft any time soon, although my first (and last) Arctic cruise in the summer would have tested Ethan Hunt to his limits. But that story is for another time. Not that I compare myself to the original Mr-Daredevil you understand - I probably channel a bit more Benji Dunn to be honest (a grumbling Scot with some skills and a heart of gold, perhaps?).
As I look forward to next year’s MI 7 Part 1, I muse that combating pension scams is a bit like Mission Impossible, with a lot less glamour. We need to accept it before the message self destructs, then use our smarts to outwit the bad guys, but WE have to do it while working within the rules. This latter point is important, as we’ll come to shortly.
PSIG has spent the best part of a year wrestling with the mission to provide practical guidance on scams after the 2021 Regulations. We need to keep several stakeholders happy. We need to recognise complexities and find easy solutions that work for all types of schemes and providers. Fortunately, PSIG is made up of technical, legal and operational experts, but equally, we come with lots of different issues, interpretations and possible approaches.
Pension practitioners and trustees are crying out for industry guidance that explains what is going on and helps interpret complex regulations into everyday language; into what to do. We feel bad that we have taken so long, but we wanted to be as comprehensive as possible, and that takes time If it was a simple mission, our Code wouldn’t be needed and we could all go and get on with the day job.
The problem is like a Gordian Knot and we need to cut rather than unravel it. Here I go comparing myself to Alexander now, but he was the Ethan Hunt of his day. Luckily, he didn’t have pension problems to deal with or he’d have stayed in Macedonia with Aristotle and then where would we be today?
To uncut the knot, all sides need to appreciate the “three laws” principle (with apologies to Asimov).
The Three Laws of Transfers
1. Pension schemes must abide by the law and their scheme rules
2. If a scheme’s rules permit discretionary transfers, then a decision to transfer (or not) will be discretionary
3. If a scheme’s rules only permit a statutory transfer, then a discretionary decision to transfer cannot be made without breaking the first law.
These “laws” help us to see the challenges created by well-meaning transfer regulations and the underlying suspicion that the industry is just being awkward.
The statutory right to transfer is a legal right that depends on certain conditions being met. The 2021 regulations expanded those conditions to include scam signs. The policy intention was quite simple – schemes should carry out due diligence before making a transfer and if scams signs are found, the scheme can use the regulations to refuse the transfer that they would have been legally obliged to make before November 2021. Policy presupposed that “safe” transfers would carry on as before, with only the few remaining pesky ones now able to be refused without risk, ie a presumption that the regulations would apply only at the end of the process.
All well and good, however, the first law (see above) applies. Schemes must abide by regulations. This means that the regulations come at the beginning of the process, this makes a big difference. Schemes that may not have carried out appropriate due diligence in the past are now obliged to and if you look for signs, especially broadly defined ones, like “incentive”, you find them. You find either an amber flag, which requires the member to take guidance from MoneyHelper, or a red one which removes the statutory right to transfer. Surprise – transfers are being held up or refused!
Not in droves, thankfully, as MaPS seems to be coping well with the numbers referred to them for guidance, but certainly enough to annoy receiving scheme providers. It is also quite likely that schemes are still not checking, or are using their discretion to make or refuse a transfer. The second law (see above) applies here and schemes must be very clear that they are using discretion and that they take into account only relevant factors (including due diligence) and the decision must be fair and not perverse. Discretionary decision-making will follow established scheme processes and can be fairly quick. These judgments might be tested at a later date, as we do not yet know how the Courts might view discretionary transfers where scams signs were present.
Things are tricky for schemes that only permit statutory transfers. The third law (see above) applies here and they can’t just use discretion to keep the peace, no matter how desirable.
Returning to the knot cutting, a solution would be to simply amend some of the flags in the regulations to be a little more subjective, perhaps referring to “material” scam signs, but while it may not be another Mission Impossible, it may be just Mission Difficult.
Margaret Snowdon OBE, Chair PSIG
