Pension scams have been a particular headache for the pensions’ industry recently and have resulted in complaints to the Ombudsman. It can be a difficult decision whether to implement or refuse a transfer request where there are suspicions that the receiving scheme may be illegitimate. The April 2015 DC flexibilities are also likely to result in an increase in pension scam activity aimed at the over 55s. Responding to concerns about how pension schemes should address the threat of scams, the industry has developed a Code of Good Practice on combating pension scams (“the Code”).
The Code sets a standard for dealing with transfer requests and suggests the due diligence steps which schemes should carry out before proceeding with a request. It is not a statutory code, however, and compliance with it is voluntary.
The Code sets out three key principles for schemes to follow:
- pension schemes should raise awareness of pension scams for their members;
- schemes should have robust but proportionate processes for assessing if a receiving scheme may be part of a pension scam and for responding to that risk; and
- trustees, providers and administrators should be generally aware of known current strategies of pension scammers to inform their due diligence.
The Code also contains useful example documents for dealing with transfer requests which schemes can use to follow the principles of the Code. These include example letters, decision sheets and discharge form wording.
The Code took effect from 16 March 2015 and is available for use in any transfer request processed from that date (even if the request was received before 16 March).
The publishing of the Code is a very welcome development as it contains practical guidance on what the group regards as industry standard due diligence when dealing with a transfer request. It will be regularly reviewed and updated to ensure it reflects current risks. Trustees should review their administrators’ processes for dealing with transfer requests in the light of the Code and also the new DC flexibilities. Although not mandatory, it will be good practice to follow the Code, which may assist in avoiding Ombudsman complaints or at least defending them.
If you have any concerns about responding to a transfer request which may involve a possible pension scam, please speak with your usual Shepherd and Wedderburn contact.