While we await the new regulations limiting the statutory right to transfer, let me remind everyone than protecting members against scams need not be onerous. It need not stop or delay ordinary transfers, as many commentators seem to fear. We should be grateful that at last we will have some legal backing to our attempts to prevent people losing their life savings, but let’s not throw out the baby with the bath water.
I see so many comments on line that checking for scams will take hours of precious time and will get in the way of an individual’s right to a transfer. Of course it could, but it shouldn’t.
What we want is a bit of scrutiny of potentially dodgy transfers. By PSIG’s reckoning, around 5% of transfers are likely to be scams. That means 95% are not likely to be, so why delay or spend time analysing them? Sure, the trick is to identify the 5%, but “how can we do that without doing due diligence on them all?” I hear you ask. Well, common sense is important here. If you are asked to make a transfer to a well known occupational pension scheme and the name and location are as usual, why waste time on due diligence? Similarly, if you transfer to the XYZ SIPP on a regular basis, why would you suddenly feel the need to scrutinise? If you use a transfer mechanism like Origo, the chances are that the transfer will be bona fide, so why add to the time and expense of due diligence? Save your focus for the ones you are not familiar with, the ones with a dislocation between where member lives and wants to transfer or the schemes that are not on the HMRC register. You can of course do much more due diligence and the more you do, the more you will protect members from bad choices, but we are not asking everyone to do this; we want enough from everyone to protect against the worst outcomes.
In short, if you have a reasonable belief that a transfer is fine, that should be enough. If you don’t, then check further.
Of course you won’t catch all the scams and you certainly won’t prevent all the transfers where the advice to a member is bad, or where investments don’t live up to the hype, but you can save many, because you will have the power to stop on red flags or require impartial guidance on amber flags.
I repeat, if you stop the 5% dodgy transfers, you will save losses of around £1.5bn a year, which is more than the official scams statistic show today. That will be a good result. Delaying 100% of transfers will be a bad outcome.
Follow the PSIG Code and you won’t go far wrong - it is seen as good practice and following it will give you some valuable protection from maladministration. The Code will be updated to reflect the new regulations in Autumn, so you should check it out.