FAQs – First Actuarial’s new approach to settling pension transfer values
The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 introduce new requirements to protect pension scheme members against scams.
Under the regulations, trustees need to make sure their administrators undertake additional checks when a member asks to transfer their benefits out of a scheme.
Everyone at First Actuarial is fully aware of these new requirements. Immediately following the introduction of the regulations, First Actuarial’s technical team provided training for all the firm’s administrators. We also updated our processes to comply with the requirements.
To show how we help trustees fulfil their obligations to meet the requirements set out in the regulations, we’ve put together these FAQs, which describe the process we follow and address questions we’ve received since issuing our November 2021 First briefing on the transfer regulations. The briefing explains the conditions that a transfer must meet and the red and amber flag system set out in the regulations.
Does First Actuarial determine what flags, if any, are present?
Yes, First Actuarial determines whether any flags are present.
If red flags are present what does First Actuarial do?
If red flags are present, the case is referred to our Transfer Group and we pass the following details to the trustees:
- Member name
- Details of the receiving scheme
- Confirmation of which red flags are present along with supporting evidence
If amber flags are present what does First Actuarial do?
If amber flags are present, the transfer is not settled at this point. Instead, the member is referred to MoneyHelper (a free information service provided by the Government), and we pass the following details to the trustees:
- Member name
- Details of the receiving scheme
- Confirmation of which amber flags are present.
If no flags are present, does First Actuarial settle the transfer?
Yes, but only if sufficient information has been provided for us to establish this.
Missing or incomplete information is requested and chased as relevant. Failure to provide information triggers an amber or red flag (according to prescribed circumstances and timeframes set out in the regulations).
What action do trustees need to take in the event of no flags, amber flags or red flags?
|Flags||Action for trustees|
|Amber||None. But we inform the trustees that the member has been referred to MoneyHelper|
|Red||Trustees must review red flag evidence and refuse the transfer if they agree with the red flags that First Actuarial has set.|
Aside from pension scam prevention, what processes and controls does First Actuarial have in place to deal with pension transfers?
With all transfer cases, we apply the standard processes and member communications we have put in place for this purpose.
Transfer settlements are processed by our administrators, who follow a detailed procedure and checklist. The administrator confirms that they’ve completed each step. The case is then passed to a checker who also completes the checklist. This ensures we always follow the standard process.
Our administrators also have case-level support from our process manager, our technical team and our Transfer Group (made up of senior subject matter experts) as required.
To prevent scams, what information does First Actuarial gather to assess transfers against the transfer conditions?
When a member requests a transfer value statement, we give them information about pension scams. This includes an explanation of the transfer conditions and a pensions scams leaflet jointly produced by The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA).
At this stage, we request the following information to assess the case against the transfer conditions set out in the regulations:
- Details of the adviser firm and the individual adviser involved. Using this information, we then carry out further checks on the FCA register and, if required, the adviser firm themselves
- Name, address and pension scheme tax reference number for the type of receiving scheme (for example, Personal Pension Plan)
- The member’s declaration that they’ve read and understood the information provided to them about scams
- If applicable:
- Name and contact details of the employer associated with an overseas scheme
- The scheme QROPS (Qualifying Recognised Overseas Pension Scheme) number, along with scheme manager ID, information and contact details. Using this information, we then carry out further checks on an HMRC register.
What’s the process upon receipt of this preliminary information?
This preliminary information is reviewed by our administration team to determine within which transfer condition the transfer falls. Where the transfer is to a scheme that is within the first condition, we’ll settle the transfer providing we’re satisfied with all the due diligence. The first condition is satisfied if the transfer is to one of the following types of schemes:
- Public service scheme
- Authorised master trust
- Authorised Collective Defined Contribution (CDC) scheme.
What if the first condition doesn’t apply?
If the first condition doesn’t apply, we move on to consider the second condition. This involves looking for red and amber flags. Where, on the ‘balance of probabilities’, there are no substantive red or amber flags, the second condition is met. Guidance from TPR states that scheme managers can choose to keep what they call a ‘clean list’, i.e. a record of low-risk personal pensions.
If the trustees give their agreement, we review the case on their behalf to see if this ‘balance of probabilities’ requirement is met. To make this as efficient as possible, we take a ‘clean list approach’ with most cases, similar to the TPR’s clean list guidance.
If a transfer is requested to a personal pension plan provided by an insurer covered by our ’clean list approach’, we’re satisfied that the second condition has been met.
If this isn’t the case (separate to the clean list approach and before moving to a second stage of information gathering), we may still conclude that there’s no reason to believe there are any red or amber flags. This could be because the receiving scheme is well known within the pensions industry (for example, the Universities Superannuation Scheme). We will of course make sure all the other due diligence is satisfied (including establishing an employment link between the member and the scheme’s sponsoring employer).
We only apply our ‘clean list approach’ to satisfying the second condition with the agreement of the trustees.
How does First Actuarial determine whether a personal pension plan falls within the clean list referred to by TPR?
We don’t maintain a clean list of personal pension plans. Instead, with our clean list approach, we check every transfer case to see whether the receiving scheme is a personal pension scheme (including SIPPs and stakeholder schemes) run by a provider that is both authorised by the Prudential Regulatory Authority (PRA) and regulated and authorised by the FCA (in essence, then, an arrangement run by a UK insurer).
In summary, rather than maintaining a list, our process is to check these two conditions for each transfer.
The advantages of this approach are that it:
- Recognises TPR’s guidance and the intention behind the original draft regulations
- Removes the risk of referencing a list that can become out of date
- Is easy to operate in practice.
Note that the legislation doesn’t allow this clean list approach to be applied to occupational schemes.
How does First Actuarial make sure that the receiving scheme is not a similar-sounding clone scheme to one authorised by the PRA and regulated and authorised by the FCA?
Our process requires an individual check against both the FCA register and the PRA website, which makes sure the information provided is an exact match with the information on the registers.
What’s the process for all other second condition cases?
For all other second condition cases, a second stage of information gathering is carried out to establish whether any flags are present. Where this is the case, our administrators write to members using our standard questionnaire.
Our questionnaire asks 22 questions linked to each of the red and amber flags. We can provide trustees with a list of all these questions separately if required, although in essence the questions are framed to assess the case against each of the red and amber flags.
We’ll ask further questions too, if clarification is needed in relation to the preliminary information gathering, or if there are gaps in the information provided.
All cases that reach this stage of amber and red flag assessment are referred to our Transfer Group, which helps determine whether any flags are present.
What reporting does First Actuarial share with the industry in the event of a scam?
In the event of a scam, our Transfer Group informs Action Fraud, TPR and MoneyHelper.
Is First Actuarial working with industry bodies to combat scams?
Yes, First Actuarial is working with industry bodies to combat scams. We have active representation in the Pensions Administration Standards Association and the Pension Scams Industry Forum.
Is First Actuarial’s process subject to review?
Yes, we will continue to monitor transfer activity and developments within the industry to make sure our processes remain robust.
The Government has also committed to a review of the regulations within 18 months of their coming into force, to make sure they remain effective in targeting the evolving methods used by scammers.
Will you be charging for these extra checks?
We charge a fee of £250 plus VAT for all cases that require the second stage of information gathering.
On an individual case, what checks are done aside from transfer scams checks?
Our process covers all the due diligence required. This includes obtaining evidence that the adviser has authority to advise on the case (where relevant) and verification of the member’s identity.
Has First Actuarial signed TPR’s transfer pledge?
Should trustees sign the pledge?
TPR is encouraging scheme trustees to sign the pledge, even where administrators take on most duties on their behalf. Before signing the pledge, schemes need to make sure they’ve taken all the necessary steps – such as undertaking trustee training and drawing scheme members’ attention to the dangers of scams.
The processes and controls we carry out on behalf of trustees align with the commitments of the pledge – including warning members about scams and encouraging them to seek free impartial guidance from Pension Wise. We refer cases to trustees in accordance with the process outlined in these FAQs.
To learn more about the pledge, our controls to meet its commitments on trustees’ behalf, or support with making the pledge, please let our administration team know or contact us.