Many of us will have spent last Friday discussing which restaurant to visit on the following Monday’s easing of lockdown restrictions. Those who did not will instead, no doubt, have been discussing the launch by the Department of Work and Pension of a consultation on the draft Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021.

The Regulations add meat to the bones of s.125 of the Pension Schemes Act 2021, which amends s.95 of the Pensions Schemes Act 1993 to add further protection against scams for those looking to take a cash equivalent transfer value of their accrued rights under any particular scheme.

They look to introduce a set of four conditions against which pension scheme trustees must judge compliance by the member requesting a transfer, namely: (1) is the transfer to a scheme pre-identified as low risk; (2) if not, can the transferring member demonstrate an employment link with the receiving scheme’s sponsoring employer; (3) if the receiving scheme is a qualifying recognised overseas pension scheme, can the member demonstrate residency in the relevant financial jurisdiction? Where none of the first three conditions can be met, the fourth condition requires trustees to review the request and the receiving scheme and determine whether there are any “red flags” or “amber flags” arising.

Red flags could arise where required guidance has not been taken, where financial advice has been obtained from an adviser without the relevant permissions, where there has been unsolicited contact with the member regarding the transfer or there appears to have been undue pressure to complete the transfer quickly. Identification of a red flag could stop a transfer dead in its tracks.

Amber flags could arise where there are high risk or unregulated investments included in the receiving scheme; where the fees being charged by the receiving scheme are unclear or high, proposed investment structures are complicated or unorthodox, the receiving scheme includes overseas investments or any of the advisers are based overseas, or there has been a high volume of transfers to a single receiving scheme or involving a single adviser or firm. Identification of an amber flag will require the trustees to instruct the member to, and demonstrate evidence of receiving, guidance from the Money and Pensions Service before the transfer can proceed.

It will be for scheme trustees to decide, in each case, whether any flags, red or amber, are raised. This is likely to mean the development of yet another skill set for already stretched trustees.

As we are all aware, pension scams continue to become both more prevalent and more sophisticated. But at the same time, workload pressures, technical requirements and compliance issues continue to increase, seemingly exponentially, on scheme trustees. Is adding to the complexity and responsibility of their role the way to go, or is removing the statutory right to transfer completely a better alternative?

The irony of the 2015 pension “freedoms” leading to increasingly stringent regulations on transfers can’t be lost on anyone involved in the pensions industry. Who said, “I told you so”?