Andy Bell, CEO of platform and SIPP firm AJ Bell, has warned that proposed new anti-scam rules on pension transfers risk undermining thousands of legitimate transfers.

Mr Bell said plans to exclude all SIPPs and personal pensions not operated by insurance companies from the safe destination list means transfers to these schemes could face “severe and unwarranted delays.”

He wants the government to ditch the ‘safe destination’ list plan.

The Government last week announced plans to tackle pension transfer fraud (https://www.gov.uk/government/consultations/pension-scams-empowering-trustees-and-protecting-members/pension-scams-empowering-trustees-and-protecting-members-consultation)

Under the proposals from the Department for Work and Pensions, providers will be required to ask pension savers transferring to a pension scheme not on a prescribed ‘safe destination’ list a series of questions to determine whether they are at risk of being scammed. 

Mr Bell said while the rules were well intentioned many legitimate transfers to mainstream pension providers could be blocked completely if customers cannot or do not want to answer the prescribed questions.

He is also concerned that the existence of a ‘safe destination’ list may mislead consumers as it might imply DWP endorsement. 

He said: “Tackling financial fraud is one of the most significant challenges facing the industry today and we have campaigned tirelessly for vital reforms, including the pensions cold-calling ban. However, it is crucial in designing any protections for savers that the cure is not worse than the disease. 

“Unfortunately, that is a real risk with the DWP’s proposed reforms, which could require savers to satisfactorily answer a set of questions before they are allowed to transfer their pension unless they are moving their fund to a ‘safe destination’ scheme. 

“Classifying insured pension schemes as a safe destination, whilst excluding platform pensions, is arbitrary. The thinking that all insured schemes are inherently safe shows the Government has forgotten the Equitable Life scandal.

“Whether or not the ‘red’ and ‘amber’ flag questions are asked will be at the discretion of the provider the person is transferring away from. Whilst it is positive that firms are encouraged to use existing intelligence to decide whether to ask these questions, some firms will undoubtedly take a risk averse approach and ask them on all non-safe destination transfers.”

He added: “Having a Government defined ‘safe destination’ list will give consumers the impression that those schemes are impervious to scams.  That is not the case and ironically might make them a target for scammers.”