Margaret Snowdon discusses the impact of the Autumn Statement announcement.

As my first blog after the much anticipated and long-awaited Autumn Statement last week, it made sense for me to talk about that and the impact it had on pensions. And what was that impact? Very little.

However it still managed to introduce some changes that will have a potential impact on administrators!

Ban on cold calling

The really good news is that the government has shown a clear intent to disrupt scams. It will consult on banning cold calling in connection with pensions scams.

This is a great first step, first proposed by the Pension Liberation Industry Group (of which PASA is a founder member) in its 'Options for Change' paper presented to government in May 2016.

However, banning cold calling must not be seen as the cure for all ills and it could tempt government and regulators to view it as "job done".

The devil will be in the detail, but what is clear is it?

• will take time to have effect
• will need communications drive to make it known to members
• may prove difficult against calls originating overseas
• will not stop internet lures, but will slow down the scams for a while.

Banning cold calling will reduce transfer workloads of course, but it will increase the acrimony for those who really want to transfer and administrators will bear the brunt of this.

The downside is that announcing the change as consultation gives the scammers an opportunity for a fire sale, so there could actually be a huge increase in calls and pressure to transfer before any legal changes get off the ground.

This is a real danger and could therefore increase the number of transfer request so much more due diligence is needed in the short term. Processes and communication with members on scam risks will need to change to refer to the ban, but, inevitably the stress of transfers will increase while it beds in.

While legislation is awaited, we should allow trustees to refuse transfers that arise from cold calling. Good guys (i.e. regulated advisers) do not cold call.

Administrators could simply ask the member for the source of their request (this is part of due diligence already, but could be asked at the outset when a transfer request is received).

This would be a discretionary refusal and therefore unwelcome as it introduces a risk of being challenged later, but the Ombudsman and regulators could accept this process and effectively create a special safe harbour from maladministration where cold calls are involved.

This could cut out a lot of due diligence on the provider if the cold calling aspect was viewed as seriously as government now implies it will be. Time to be bold.
Power to block suspicious transfers

Giving trustees greater powers to block suspicious transfers is welcome too, but it could mean either a discretionary power for non-statutory transfers or a change to the statutory right to transfer itself, perhaps to introduce an earnings link as recommended by PLIG and others.

Discretion

Discretion looks good on the surface and could work, because the trustees' role is to exercise judgment, but it takes a brave trustee to use it against suspected scams.

It brings the risk of challenge down the line if the decision is not liked and this would inevitably result in financial risk and hassle for the administrator associated with settling such a transfer.

Discretion (for non-statutory transfers only) would therefore need to come with a "safe harbour" from HMRC, PO and TPR. Discretion would still require due diligence on the receiving scheme and to determine whether a statutory right exists.

Earnings link

Introducing an earnings link to statutory right to transfer to an occupational pension scheme would give greater clarity. However, it needs careful thought to make it work and administrators would be required to check that the link exists and was not bogus.

Either approach would require new processes, training and potentially more work in the short term, but done the right way could eventually ease the workload and reduce the level of uncertainty and financial risk that administrators currently face.

The statement was a great step forward and over time the measures could make life easier for administrators and help protect members from the unscrupulous. The work needed to change processes and communications would be worth it to stop the flow of savings to scammers.

However, whatever emerges from the consultation, it must give greater assurance than the current good faith defence, which seems to be of little value, given the number of scheme sanction charges levied against administrators by HMRC.

The PLIG Options for Change paper can be seen in more detail on the website www.combatingpensionscams.org.uk

First published 02.12.2016

Lindsay.sharman@wilmingtonplc.om