The Society of Pension Professionals (SPP) has warned that new measures designed to protect savers from pension scams could be undermined by legislative loopholes.
The SPP was responding to the current DWP consultation on the subject of pension transfer regulations.
The Society endorses the creation of a new, broader "Condition 1" gateway, saying the change will allow trustees to fast-track transfers to "reputable schemes," reducing delays for members and easing the administrative strain on statutory guidance services.
However, the SPP warned there is a critical loophole in the proposed "employment-link" red flag meant to curb fraudulent SSAS transfers.
Under current rules, if a member provides only partial evidence of an employment link, the transfer must be treated as an amber flag rather than a red flag due to the existing legal definition of a "substantive response."
As a result, scammers or poorly advised members will still be able to bypass the red flag and force transfers through after attending a mandatory guidance appointment, the SPP said.
To make the regulations work effectively, the SPP said the DWP should amend the definition of a "substantive response" specifically for SSAS arrangements, or to adopt an alternative principle-based framework that focuses on whether a scheme is being used to facilitate a scam.
The SPP also recommended that the proposed 12-month exemption for repeat MoneyHelper appointments be limited to transfers to the same receiving scheme. That should help prevent persistent, iterative scam tactics from slipping through the net, it said.
SPP Council member Faye Jarvis, said: "While the SPP strongly welcomes the introduction of a subjective 'reputable scheme' gateway, clear regulatory guidance will be vital to ensuring this works smoothly in practice.
“At the same time, we are seriously concerned that the new employment-link red flag is fundamentally flawed.
“In practice, members often cannot provide complete documentation for a range of legitimate reasons, and under the current definition of a 'substantive response,' partial evidence will still allow high-risk transfers to proceed as amber flags. Without closing this loophole, the proposed regulations will not provide the robust safeguards that pension savers need."
Pensions UK said proposed changes to the 2021 pension transfer regulations are a step in the right direction but also warned that the reforms risk falling short of their objectives without clearer guidance for schemes and administrators.
It said tthe changes should help reduce unnecessary delays in legitimate transfers while maintaining strong protections against pension scams. However, clearer guidance and a consistent approach will be needed if they are to deliver their full benefits in practice.
Zoe Alexander, executive director of policy and advocacy at Pensions UK said: "Transfer changes are a strong start in the right direction, but they are not the finish line. Clear and practical guidance will be essential if schemes are to apply the new framework consistently and with confidence. Without that clarity, there is a risk that measures intended to speed up transfers could create new uncertainty and additional delays instead.
"As scam tactics continue to evolve, we also need to ensure the transfer framework remains flexible enough to respond to new risks. We look forward to working with government and regulators on the wider package of transfer reforms needed to deliver a system that is both safer and smoother for savers.”