Article Summary

UK expats in the US who are members of a UK pension scheme or their independent financial adviser can, in theory, register an official request to transfer their pension fund. However, the UK pension providers and the FCA recommend and, in certain situations, require pension members to seek advice from a qualified IFA if they are considering transferring their pension fund. 

This regulation is designed to ensure that each pension member knows all the essential information including an explanation of the risks of the products, costs, and penalties that may be applied, the risks connected with investing in the financial market, and their protected rights before completing the transfer process. 

When we say in certain situations, we mean that if your pension fund exceeds £30,000, you must get independent advice from an FCA-regulated financial advisor before completing the transfer. Furthermore, some providers require individuals to seek advice if they are considering a transfer. It implies that direct transfer by pension members is not authorised.

In addition, the UK government requires the ceding scheme to conduct thorough due diligence on the transfer. The ceding scheme in this context refers to a pension scheme member’s present provider, from whom the member desires to move their pension fund from.

Dominic James Murray, an Independent Financial Adviser with 10 years of expertise managing expats pension transfers, will expand on this in this video on how the new regulation may delay or even halt the transfer process, as well as how our business responds to this circumstance.

If you have any concerns regarding this new rule in particular, please contact us via the website and leave an enquiry. You may also arrange a direct one-to-one session by clicking on the calendar link below. We will assess your circumstances and assist you in determining what is best for you.

UK Government’s New Rule on Amber and Red Flag

Empowering Trustees and Protecting Members

In the past 5-10 years, many people ended up in pension scam situations. This is why, UK government is now placing a massive burden on UK pension providers to complete due diligence on pension transfers.

In August 2017, the UK government passed laws to combat scams, including the main acts; prohibiting cold calling in connection to pensions or to assist in preventing scammers from contacting victims, restricting the statutory right to transfer to certain occupational pension schemes, and making it more difficult for fraudsters to open pension schemes.

In principle, the United Kingdom’s pension system is the most advanced of any country. Additionally, with the advice of a qualified IFA, you can ensure that your pension plan decision is well considered and appropriate to your needs. 

However, with this highly regulated system, we can still see that many UK pension members have been victims of fraud. Over the last five to ten years, the UK government has come under criticism for the number of UK pension scams that have taken advantage of the UK pension system. 

There have been various types of pension scams in the UK, all of which may result in the loss of a person’s lifetime earnings in an instant. Scammers are aware that you can withdraw and transfer your pension fund in a variety of ways. They will try to persuade you to cooperate with them to transfer or withdraw your pension in exchange for a quicker, one-time process and unrealistically high returns. 

Report Pension Fraud

The government recognises that pension fraudsters’ actions are difficult to trace and constantly changing to avoid prosecution. Furthermore, these pension scammers in the UK always target individuals when they are at their most vulnerable. The governments have documented that about 3,000 allegations of crime have been received by Action Fraud in the 5 years from January 2015 to December 2019.

Pension Scheme Act 2021

According to the Financial Times, on May 14th, 2021, the UK Government proposed new legislation that grants authorities to a trustee or pension manager to block a suspect pension transfer, as well as a red and amber flag system to identify transfers to the scheme that do not meet specific requirements. On the other side, this legislation holds the UK Ceding Scheme financially responsible and allows the trustees to sue if a pension fraud happens under their watch. 

In this context, a trustee is defined as an individual or company appointed to govern a trust-based scheme for the benefit of scheme members following the provisions of the trust instrument, the legal document that establishes, as well as governs, or amends the scheme, and general provisions of trust law.

Trustee Responsibilities the UK

The primary goal of this empowered trustee legislation is to protect pension members against transfer fraud. This new legislation includes further responsibilities of the trustee or scheme manager:

  • This new regulation mandates trustees and scheme managers the authority to decide whether or not a transfer may take place by outlining the requirements that must be satisfied.
  • The trustees must confirm that the member can prove the connection between themselves and the pension scheme to which they wish to transfer. If the members wish to transfer to a QROPS and cannot demonstrate an employment connection, they must show residency in the same financial jurisdiction as they wish to transfer. 
  • The new regulations will allow trustees to decline a transfer request if they notice ”red flags” They will also prevent people’s hard-earned funds from being transferred to suspicious schemes without professional guidance in the case of other potentially fraudulent transfers. These restrictions can apply to both the transfer’s destination and situations in which the pension holder is unsure how their money will be invested or how much they will be paid for their savings to be managed.
  • The trustee may conclude that red and amber flags do not exist without further checks or activities to be carried out by the Trustee within its existing processes.
  • This new measurement enables trustees and managers to act, building on the government’s previous prohibition on pension cold calling and stricter restrictions to prevent scammers from opening fraudulent pension plans.

Red Flag vs Amber Flag Pension UK

  • A red flag appears when: A member fails or refuses to respond to a request for information about the circumstances behind the transfer.
  • The trustees or management of the transferring scheme have requested that the member follow certain guidelines, but the member has not given the necessary proof.
  • A red flag is present when a person or firm without the necessary regulatory permission has provided financial advice to the member concerning the transfer.
  • The member’s request to make the transfer was made in response to unsolicited communication about making a transfer from a previously unknown party.
  • A financial incentive has been provided to the member in exchange for making the transfer.
  • The individual has been forced to make the transfer as quickly as possible.

An amber flag appears when;

  • There are high-risk or unregulated investments. 
  • The receiving scheme charges ambiguous or excessive fees.
  • The receiving scheme’s investment structures are ambiguous, complicated, or unconventional.
  • The receiving scheme has overseas investments, or an overseas adviser has advised the member on such assets, or the trustees or managers of the transferring scheme are aware of a large number of requests to transfer from their scheme.

UK Ceding Scheme Potentially Slows Down or Stops the Pension Transfer Process

From our perspective, anything that safeguards our clients or prevents people from the theft of their UK pension fund is generally beneficial. However, the opposite side of the equation on the completion of the pension transfer process is also present; we recognise that delays in the transfer process might have a significant impact.

Many of our clients who visit our website have done their research; they’ve read our Google reviews, testimonies, and regulations, and they can see that we’re officially qualified and charging on a transparent fee basis.

Furthermore, our clients know exactly where their pension will go, what their costs will be, and what the underlying funds will be. In the current situation where our clients tell all that information to the UK scheme, we still come under scrutiny from the UK providers. This is not because of Cameron James, but typically because of the client’s residency.

UK ceding schemes believe that anyone who resides outside of the UK is transferring to a scam because they aren’t working with someone in the UK. They would assume that the client doesn’t know what they’re doing. We must go through a lengthy procedure under existing regulations to complete the transfer.

Once this regulation is approved, we expect it will be carried out within a few months. It will become much more difficult to complete a UK pension transfer, and it will take even longer to process the transfer. When we complete a DB pension transfer, it can take up to six months; however, the typical period is two to three months, and it might even be six to eight weeks. It takes much longer now that there is a new regulation in place.

Don’t Be Confused, Let Our IFAs Help You

While the new regulation can take your statutory right, however, you should not be worried. As long as you leave your UK pension transfer business to a qualified and FCA-regulated IFA, such as Cameron James, your IFA will help you to take care of your Final Salary Pension transfer. Hit the button on the right side to start speaking with one of our qualified IFAs for a free initial consultation.

Our Founder & CEO -
Dominic James Murray

I have been in the UK Pension Transfer industry for over 11 years, and have witnessed seismic changes in the UK Pension rules over the course of that decade. Most to the benefit of the UK Chancellor or to Chequer!

My 5 years as CEO of Cameron James, have certainly been the most rewarding. My goal, has been a simple one. Provide clients with transparent financial advice on a low-cost basis, for them to make informed decisions to protect their families best interests.

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