Scheme Sessions Volume 1.2022 - The New Transfer Regime

Jason Coates: Well, hello everybody and a very warm welcome to this Gowling WLG Webinar. Welcome to what is our second webinar in our series of scheme sessions Volume 1 2022. Last week in our first webinar we were fortunate to have Sarah Horan of ITS and Louise Sivyer of the Pensions Regulator and we discussed governance and what's new in particular, the Single Code and diversity and inclusion, and when we've completed our series of webinars each of them will be available to look at if you did miss it through a download video. Next week we will have our third and final webinar where we'll be looking at back to basics on governance and we have Charlotte Scholes from Gowling and Nick Hill from Outer Chambers talking to us about good practice and record-keeping and its documentation and so on.

And today's topic is the new transfer regime. I'm delighted to have Margaret and Maddy with us today who I'll introduce a little more in a moment. So just a quick bit of housekeeping – so in terms of the format for this session we'll be asking Margaret and Maddy to talk to us for a short while, they'll be doing a short presentation and then we'll open up to Q&A. We'll be aiming to wrap up somewhere between 12:45 and 1pm. You should see at the bottoms of your screen the Q&A button, so please feel free to put any questions through to us as the presentations come through at any stage and I'll be watching out into the inbox to see what questions are coming in and we'll try and pick up as many as we can.

As always there's an opportunity for feedback at the end and we're always really grateful to any feedback you can give us, if you'd fill in short form at the end we'd be very grateful indeed.

So today's topic, the new transfer regime. Transfers from pension schemes have long been a topic that we've all been grappling with, both in terms of, you know, protecting members and also protecting trustees. We've had new regulations come through and we'll be talking about those this morning and we're absolutely delighted to have Margaret Snowdon with us today alongside Maddy from Gowling. Now Margaret has probably one of the most impressive CVs of anyone in the pensions industry and I only need to mention a few things alongside her OBE. Top 50 Influential People in Pensions, Pensions Personality of the Year, Top 100 Women in Finance and an industry champion, just to name a few. So this is as close as I get to pensions royalty and it's fantastic to have Margaret here and even more importantly for today's purposes, you know, Margaret has been at the centre of the transfer world and the regulation and protecting members against scams, so we're absolutely delighted to have Margaret with us this morning… this afternoon.

And alongside Margaret is Maddy Frost and Maddy's a very experienced legal director with us here at Gowling and Maddy's part of the leadership team for what we call our Scheme Advisory Pillar. Maddy advises trustees on all aspects of pensions law but has been giving a lot of our clients advice on this very topic over recent weeks, so again is the perfect person for us to have for this session.

So that's plenty from me, delighted to have Margaret and Maddy here. I'll be looking out for your questions as you put them through and hand over to Maddy.

Maddy Frost: Thank you, thank you, Jason. So good afternoon everyone and thank you for joining us. As Jason says, in today's session we are going to be talking about the new conditions of transfer regulations which came into force with some haste on 30 November last year and are applicable to transfers out of pension schemes requested by members from that date. I'm also very happy to have Margaret joining me for this session and in a moment I am going to pass over to her as she is perfectly placed as chair of the Pension Scam Industry Group to put this session into context for us by reminding us what actually is a pension scam, why are they such big news and why members may need protecting from them. I'm then going to run through what the regulations actually say. I'm sure you'll be very relieved to hear I'm planning on doing that pretty quickly leaving plenty of time for Margaret to give her view as to the regulations as they've landed are actually consistent with DWP's policy intent behind them and also to comment on how they've been received by the pensions industry. We will then turn to look at some practical issues that have arisen from the regulations and how we hope some of the problems will be resolved and then at the end as Jason said we'll leave lots of time for questions.

So briefly just to introduce the topic, the regulations. Now the aim of the regulations is of course to protect members from pension scams. It's been highly publicised that members have been caught out by scams and sadly lost their entire pension savings. Of course trustees don't want this to happen, no-one wants this to happen, but what the regulations do is to put the onus on trustees or managers, or I will probably refer to them as trustees as I go through, to carry out checks before enabling a member to proceed with a transfer that the member himself has requested.

Now the new requirements apply to statutory transfer requests by members of both DB and DC, occupational and personal pension schemes in both the public and the private sector. So if the trustees or managers of these types of schemes are not satisfied that the prescribed conditions are met the member's previously absolute right to transfer his or her pension benefits is lost. Now this immediately sounds like quite a lot to put on the shoulders of trustees and this is in addition to ensuring that the current transfer requirements are met. So the requirements that already existed for DB transfers over £30,000 in order to access flexible benefits, that still applies as does the statutory time frames for complying with transfer requests.

But that's enough from me by way of introduction. I'm going to pass over to Margaret now who is going to look at what is a pension scam. Thank you, Margaret.

Margaret Snowdon, OBE: Thanks, Maddy, and good afternoon everyone. I thought it might be useful to look at the definition of a pension scam because it's quite important that we know what we're trying to protect against and why. Now the definition is up on the screen at the moment and I don't expect you to read it all but there are a couple of key points, one being marketing which means publishing, publicising, you know, trying to entreat people to do something, and it's also whether it's successful or not so it can be an unsuccessful attempt and it's still, you know, a scam. And as far as we're concerned it's transfers from HMRC-regulated pension schemes but there are various ways that that can happen.

But one of the key points is a scammer has to be misleading. So if a scammer tells you something that you know is quite true then that's not… you're not being misled. But it's the fact that you're being misled about the risks you face, about the fees you're charged, etc, that's the key point that makes it a scam. But, you know, we hear all the time about scams being now investment scams rather than pension scams implying that pension scams are no longer a problem. So we need to consider whether we need to change the definition to make it a little bit clearer and particularly the problem is with law enforcement because, you know, they'll only go where there seems to be a big problem and if we don't signal, you know, a problem with pension scams then they will focus on something else, whether it's romance scams or whether indeed it is investment scams. So we need to be able to, you know, show what we're trying to protect against and then basically check that we're actually doing that.

So we have to think about whether we want to extend or narrow down that definition, so that's something PSIG is working on at the moment and working with Bloom to try and see if we can do anything and one thing we're looking at is actually trying to find a way to extend it into investments that are made by people after they've taken money from the pension scheme. The key for us is whether the source of the money is a pension scheme but it's quite possible that it's one step removed by somebody taking cash from the pension scheme and then giving it to a scammer. Now we need to make a clear position on that, whether we think schemes who have got no power to dictate what people do with their money, whether we try to intervene in that or not.

But it's important to distinguish between scams and unsuitable transfers. A lot of what was on is actually unsuitable, it's not necessarily a scam, it's just not the best thing for an individual to do but, you know, it's not a pension trustee or provider's job to try and, you know, dictate what individuals can do. FCA is, you know, there to try and make sure the standards, the quality of the advice, financial advice, is good enough. So we need to be sure that we're not trying to solve every problem in the universe with limited resources.

So move, move onwards, just to give you a little flavour of the scale of pension scamming and why we need to home in on it and why we need to do as much as we can to prevent it, and to put it into perspective, £60 billion is the number of transfer requests received in a particular year. That's a hell of a lot of transfer requests and they don't all go ahead for various reasons but around about half do. So that's £30 billion worth of money leaving pension schemes, a scary amount. Now I've said, you know, around about sort of £10 billion has been scammed since about 2015 and that's a frighteningly large number and it's nowhere near the number that's being officially quoted because we have no stats, we've got no information on that. But typically £1.5 billion is being scammed from pension schemes though transfers in a typical year and that's, you know, between six and ten thousand people which is important to bear in mind, and I've got 50%25 up - you can hardly see it - but 50%25 really is the pension population who would not spot a scam staring them in the face and that means, you know, we have got quite lot to do to try and stop things, you know, deteriorating and disadvantaging people.

So I'll hand back to Maddy who will give us the good news or the bad news on the regulations and what needs to be done.

Maddy: Thank you, Margaret. So the regulations. Now the process in the regulations is quite specific and quite detailed and as I mentioned at the outset could ultimately lead to the trustee deciding that the member has lost their statutory transfer right. Now the first step in this process is for the trustees of the transferring scheme to notify the member within one month of the transfer request that the transfer cannot actually go ahead until the trustees make a decision that one of two conditions is met. And TPR, I should've also said at the outset, TPR has issued some new guidance and in that guidance it sets out what as a minimum trustees should ask for and to be honest this is a kind of statement of the obvious, it's members name and address, information about the receiving scheme and information about the IFA and any other individual involve in the transfer.

But having done that the trustee must then consider if the first condition is met and there on slide 9 you'll see that, dare I say, this is the easy part. If the first condition is met, it is met if the transferring trustee is satisfied beyond reasonable doubt – I'll look at what that means in a moment – that the transfer is to a receiving scheme that is either a public service scheme, an authorised master trust on TPR's list or, when we have them, an authorised collective money purchase scheme. Now here we have the higher 'beyond reasonable doubt' standard of proof which is proof, the proof often used in criminal cases as opposed to the civil standard, the one that the trustees will be more used to on the balance of probabilities. I think however that given that it should be pretty clear whether the receiving scheme is one of those listed this actually shouldn't be too onerous for trustees to determine. The trustee just must not have a reasonable doubt that the receiving arrangement is a public service scheme or actually is a master trust. So if the trustee is satisfied, the transfer can proceed and consideration of these regulations is over – of course subject to complying with the existing requirements under the existing transfer regime.

Now it gets a little bit more complicated, if we click to slide 10, if the first condition is not actually met. So if the first condition is not met, the trustee then has to determine if the second condition is met which means an assessment of the existence of red and amber flags. If there are no red or amber flags, the transfer may proceed and the member will be informed. If there are red flags, the transfer may not proceed and the member must be told within seven working days of that decision. If there are no red flags but there are amber flags, the trustee must require the member to seek guidance from the Money and Pensions Services and that in itself will raise some issues that we will discuss a bit later on in the session. So they must seek this guidance and also then provide evidence to the trustee confirming that they have taken this guidance. However it is only a red flag then if they fail to provide this evidence and the transfer may not proceed.

So if we click onto slide 11, let's start thinking about what these flags are. So in order to carry out an assessment of flags, first the trustee needs to know if transferred to an Occupational Pension Scheme or a Qualifying Registered Overseas Pension Scheme, so an OPS or a QROPS. If the transfer is to an OPS, the trustee needs to request evidence of an employment link. If the receiving scheme is a QROPS that is not an OPS, the trustee must request evidence to demonstrate a residency link. Where the receiving scheme is a QROPS that is an Occupational Pension Scheme, they can request evidence to demonstrate either link. So both the employment and the residency link are intended to establish the legitimacy of the transfer by evidencing that link between the member and the scheme the member wants to transfer to. I think the employment link is particularly interesting. I think it's addressed the position decided in a High Court judgment where it was deemed that although the member had earnings, they didn't actually have to pay… be paid by an employer in relation to the scheme.

So I think the intention of the regs here is to demonstrate that real employment link and in order to establish that the trustee should be satisfied that the member's employer is a sponsoring employer of the receiving scheme, that the member has worked there for at least three months and has received pay for doing so and has paid contributions to that scheme. Establishing the residency link will be different because the evidence that will be required may vary depending on the country in which the member needs to demonstrate he or she is resident in. TPR guidance then sets out the evidence that the trustee should request to establish these links – and I don't propose to go into that in any detail at the moment.

But there of course is fourth scenario and that's the transfer is to an arrangement that is not an Occupational Pension Scheme or a Qualified Overseas Pension Scheme and in which case the trustee then has the ability to decide what information if any that it requests to determine whether there are any red or amber flags.

So before I look at what the other red and amber flags are, I just want to note the process on the next slide which is it is only if a substantive response to the trustee's call for evidence of an employment link or a residency link is not received that a red flag is raised. If an employment or residence link is not established, this is an amber flag and in itself, provided that the member does go and get MaPS advice and that this is evidence, would not mean in itself that the trustee could stop the transfer. Also if an employment or residency link is established for a OPS or a QROPS, the trustee must also look for other red or amber flags before the second condition can be satisfied. So looking for an employment link or a residency link is not necessarily the end of the story.

So going on to these flags, slide 13 sets out what the red flags are, and of course this means the transfer may not proceed. Now the first two red flags must be decided by the trustee beyond reasonable doubt. This means that the trustee must have no reasonable doubt that the member has failed to provide a substantive response to the request for evidence of information. So the trustee has asked for residency, employment link or other information and the member has not provided a substantive response to that request. A substantive response means, and this is specified in the regulations, to provide at least part of the evidence or information requested. So… and before the trustee can deem this failure a red flag it must send a reminder to the member at least one month after the initial request and then a further reminder after a further month.

It also will be a red flag that the trustee must decide beyond reasonable doubt if the member has failed to provide evidence that he or she has taken MaPS guidance. I expect that actually that the trustees will determine this only if the member has not provided any evidence to the trustee's request and hasn't provided a reference number that will be given by MaPs. So that should be relatively easy for the trustees to determine.

There are other red flags. Joy, please can you pass to the next slide? Thank you. There are other red flags listed on the slide there. I think these are all the things that would generally raise alarm bells for trustees that there's a transfer to a scam arrangement. So an unregulated person has carried out a regulated activity, the member has been contacted by someone out of the blue, been offered an incentive to transfer or that the member may have been pressurised into requesting a transfer.

Now in deciding if these red flags are present, the trustee only needs to have a reason to believe that the flag is present and this means having a reasonable foundation for the belief based on the evidence available and this is a lower standard. And I suggest that this would actually cover any valid suspicion that the trustee would have that one of those red flags is present which I think is actually quite important because the trustee will probably never be able to get certainty on some of these things because it's inevitably relying on what the member tells the trustee. It won't otherwise know if there's been, say, unsolicited contact or the member has been incentivised to make this transfer.

So on the next slide we set out the amber flags. Now if these are present the member must seek advice from MaPs. The first is that the trustee has been provided with a substantive response to its request for information, so it has been provided with some information from a member but it's incomplete and this must be decided beyond reasonable doubt meaning the trustee must be pretty certain that the information is incomplete. In deciding if the other amber flags are present the trustee must decide if they have reason to believe they are present. So evidence is either not provided by the member or they don't believe it to be genuine, the employment or residency link is not demonstrated to the satisfaction of the trustee, there's high risk or unregulated investments in the receiving scheme, unclear or high fees charged by the receiving scheme, whether the investments are complex, unclear or unorthodox, if there is any overseas investment included in the receiving scheme – we will be coming back to that one a bit later in today's session – and also if there's any sharp and unusual rise in requests that seem to have come from the same firm of advisers or to a particular scheme.

Now going through that list there are a number of terms here for the trustee to consider – 'high risk', 'high fees', 'unorthodox' – which are all defined in the regulations but only by reference to a comparison of what would be considered normal or in a normal range. So it's going to be for trustees with their advisers to consider how these terms are defined more exactly for them.

So I think that's enough from me, a whistle-stop tour of what the regulations say. We're going to pass back to Margaret now who is going to look at the extent to which DWP's policy intent has been met and to touch on some of the practical issues. Thank you.

Margaret: Thanks, Maddy. Phew, that's quite a trot through very complicated regulations. It's interesting to look at the DWP policy intent, what they meant to happen, and it's actually quite clear. DWP was responding to requests from PSIG, from various other bodies, from the Work and Pensions Committee as well, to bring in some legislation to try and help trustees and providers stop pension scams. Maddy alluded to, you know, the FUSE case earlier when she was talking where it became very clear that it was very difficult for trustees to refuse a case, a transfer where there was a statutory right. So DWP, you know, thought about it, worked with us for quite a bit of time to come up with what they intended. The headline intention is they wanted to provide a tool to trustees and providers to allow them to stop dodgy transfers. We were continually telling DWP that trustees had their hands tied behind their backs and as long as there was a statutory right, which is a very strong right, it was very difficult for them to defy that. So, you know, the purpose behind the regulations is to do just that. It's not to increase the workload of, you know, trustees' schemes administrators but it is to try and give you what you might call a tool of last resort, you know, to be able to say 'No, I don't like this, I've got various flags coming up, therefore I'm going to stop it', and for the first time trustees will be pretty safe if they do that.

Now it's one thing, you know, to set out lots of amber, red flags – PSIG has been doing it for a few years – but it's quite difficult to code it for regulatory purposes. It was quite a painful process but it was actually a very rapid process in the scheme of things, so there are a couple of things that don't quite work and, you know, we'll be trying to, you know, find ways to make it work because what we don't want is we don't want people to go 'Oh, this is just too hard, it really hasn't done the job, therefore we'll disregard it' or 'It really encourages us to take, you know, minute actions all the time, therefore, you know, will just get in the way of every single transfer and slow down the whole process.' Both of those would be a failure and it would be a disregarding of a gift in a sense that's been given, an opportunity to stop pension's scams. So we do need to try and make it workable.

One thing I would say is the… I mentioned the statutory right and, you know, the regulations only affect the statutory right. They only remove the statutory right if conditions aren't met but they don't interfere at all in drawdown transfers because they're not subject to a statutory right. They don't affect the majority of partial transfers and of course they don't affect discretionary transfers. All they do is say that if certain conditions aren't met then a statutory right doesn't exist. So we need to try and keep it in context but, you know, basically if you were happy to transfer to a particular scheme in the past, there's no real reason why you wouldn't continue to be content to do that but you do have to justify your decisions. There's no question it's tricky and there's no question, you know, there's sometimes a little bit of a rigmarole to go through. Lots of schemes have been doing this themselves already but they've now got something that justifies them doing it because it can lead to a refusal to transfer.

But, you know, the big question will be how will this all play out and unfortunately we'll only know in the long term how it plays out. I think, you know, we really do need to do our best to comply and be reasonable and the big test will come with the Pensions Ombudsman and if he doesn't like what you've done – and what he won't like is people making no attempt to try and discover whether a transfer is right or not – you know, you'll lose, if you don't do any due diligence. But he's highly unlikely to find against you if you have done due diligence and he's proved that in the past where he's tried, you know, to support pension schemes' efforts but, you know, the courts overruled and that's what happened in the FUSE case. So the big test will actually be when we get to a court case around this and, you know, that will be possibly three years down the line by which time, you know, we all know the DWP policy intent. We know there are a couple of wriggly bits within the regulations that don't help but, you know, those inconsistencies will be clarified and they'll be clarified before anything gets near the court. That's my, that's my view on it. But it's still, it's still an issue and we've still got things to do. There are new notification requirements, a couple of extra bits of admin which, you know, boil down to good practice. But yeah, it's not what everybody does.

So moving onwards, you know, I'll look at a couple of practical tips. First of all, some of the things we're hearing from the industry is that administrators are referring a lot of cases now to trustees. They seem to have lost their confidence in looking at, you know, transfers and trying to decide whether ones are at risk of scam or not. So they're passing the buck a little bit to the trustees, leaving them with the problem, which of course means that trustees are more tempted to pass it onwards to their lawyers so somebody else gets to carry the can to try and decide whether this is a fair transfer or not. But also we've got a lot of responses that show that people think this is a good thing, you know, they really like the principle of having a tool to be able to refuse and not worry that then some claims management company is going to come and pursue them for restitution.

A lot of schemes are not making changes at the moment because they're not quite sure what they have to do and, you know, we need to make sure that that message is heard and some are referring a lot of cases to MoneyHelper already and that's because, you know, they're not sure, therefore err on the side of caution and refer cases to MoneyHelper. Now at the moment it's not a burden for MoneyHelper because they are resourced to deal with a targeted number of cases but it does tend to be the same firms who are making those referrals to MoneyHelper. I think the MoneyHelper guidance is being appreciated but obviously there's a risk it could be swamped if everybody just takes that view.

But a lot of other schemes and particularly ones in the contract space – insured schemes, personal pensions, etc – they transfer on a discretionary basis so, you know, they're not impacted by this at all except, you know, they've got to make sure that even in discretionary cases they apply good scrutiny, good due diligence processes. But a lot of personal pension transfers are from insurer to insurer so they're seen as a little bit safer and the insurance companies are happy to transfer those on a discretionary basis.

So in terms of how you go around this, I've said it's not a detective story, you're not expected, you know, to become Hercule Poirot and try and, you know, drill down and find out who the bad guys are, etc. It is largely on the balance of probability. Now listening to Maddy, she rightly points out that there are different levels of proof requires for different bits. That's a bit unfortunate because it does actually confuse people but I think a rule of thumb is think about it as, you know, what a reasonable person would conclude with the information they've got and that's a non-lawyer's response and I don't have to be responsible for any outcome so I can say that.

But it has to be proportionate and the DWP intended it to be proportionate. They look at it the way PSIG does which is 95%25 of transfers are unlikely to be scams, so don't apply, you know, the tight tests to every single transfer or you'll have a very bad outcome and you could have a very bad outcome for delaying a transfer as well as for transferring to somewhere that's a bit risky. So we can rely on trusted transfers, whether they're because you transfer to certain places regularly and you do check that they're not cloned, they're not impersonations, so you can transfer to places you know very well without having to re-do the due diligence. You can use clean lists, green lists, whatever you want to call them, as long as they're up-to-date and as long as, you know, something hasn't fallen over, you know, in the two years since you last looked at your list. And I mentioned already discretionary transfers, you know, they can continue, you just have to make sure that you don't do it as a lazy alternative to, you know, looking for the statutory right to transfer.

And another point is, you know, there's a lot of commonality regardless of which approach you might want to take and what PSIG is doing right now is trying to come up with the common touch points to try and make the process a little bit more straightforward and also to include templates, to look at the timing and, you know, Maddy mentioned notification of conditions to, you know, the transfer member. But you can think about that a little bit creatively and the way the regulations are worded is that it says notification of the condition used has to be made before the member has notified the transfer has been received. Now that means, to a purist and a non-lawyer, that's very much, you know, if you don't ever tell the individual that a transfer has been made or received then there isn't any notification of the condition required. But the easy way around it is for a notification of condition to be given by the receiving scheme so that when they, and if they, say that a transfer had been received it's very easy for them to say whether it's under Condition 1 or Condition 2. If it's Condition 1 they'll know it because there will be a Condition 1 scheme and if it's a Condition 2 and it's very obvious that, you know, they're not a master trust, they're not a public service scheme, etc., therefore it has to have been under Condition 2. So that's a workaround and that's the sort of thing PSIG is grappling with at the moment but I'll sort of leave this slide on the thought that 95%25 of transfers are not scams. The five per cent that are, are worth £1.5 billion and they're the ones that we want to stop.

So I'll hand back to Maddy who's going to look at little bit at one of those wrinkles, wriggly bits that I mentioned.

Maddy: Thank you. Yeah, I'm sure you won't have failed to notice this though, when looking at the amber flags I actually mentioned that one such flag is if there are overseas investments by the receiving scheme. Now if there are, this is an amber flag which means the member has to go and seek guidance. Now clearly most receiving schemes will trigger this flag and MaPs will be very busy and this does not seem to be practical. We're all up for finding pragmatic solutions, however having looked at the words of the regulations they are pretty clear and they don't seem to give a discretion or any element of risk assessment in this requirement. Now while TPR guidance does suggest that trustees should be taking a risk-based approach there's nothing specific in the guidance on this point that act as protection for trustees and it doesn't seem that the wording leaves any room for the trustees to exercise its discretion and take a risk-based approach. Now I appreciate the practical issues that this may cause although while the regulations say what they say I think it's difficult to see how the trustee can take a pragmatic approach and this is something that we hope will be ironed out sooner rather than later.

And that was all I was going to say on that point. I'm going to pass back to Margaret who's going to look at some of this unfinished business.

Jason: Margaret, you're just on mute.

Margaret: I do that, I do it in every single meeting, I don't know why. But anyway, there we go. Unfinished business – Maddy very rightly points out, you know, the dilemma we have because, you know, trustees have to follow the law, the courts have to follow the law, the Ombudsman has to follow the law. But the Ombudsman can take into account good practice and that's why I mentioned earlier that the crunch for a lot of this will actually be anything that comes to the court and I like to think that, you know, the wrinkles like the very clear one on investments overseas will be resolved within that time. And it's come about, we did actually point out to DWP before the regulations were laid that this, which was a last-minute change actually, was going to cause a lot of difficulty and they were under a tight deadline to get things done and they couldn't see how they could get around it. I mean, we as non-lawyers can say 'Well, all you need to do is change the definition of an overseas investment', but you know, that's quite difficult to get through all of the process. So we're kind of stuck with that at the moment and to try and get around that, TPR issued guidance that said 'No, no, look at it on a risk basis' which is fine but it's still not statutory.

So Maddy's right, there is a problem but, you know, we'll… in the short term I think we'll get around it by taking a risk-based approach but in the medium to longer terms we do have to solve the problem. DWP has undertaken to review the legislation in 18 months. They might do it a little bit sooner than that which will give us a chance to head off, you know, potential issues, particularly issues with the court. But it's a wrinkle we could have done without actually and arguably, I mean, I think personally I think it's a little bit like snatching defeat from the jaw of victory because it worked very well until that very last-minute legal blip. But we'll get that resolved, I'm quite confident that we will. In the meantime we're looking to publish version 3 of the code that will take these little wrinkles – the overseas investments isn't the only one, there are a couple of other bits and piece – so we'll be trying to help navigate that with a sort of sensible pragmatic solution bearing in mind, you know, the wall could come tumbling down but let's not tumble it down ourselves first is what I would say.

Other things we still need to do is we do need to gather information on transfer because while we guess what the problem is, while we base it on samples and extrapolate from that, we're still not getting the real traction and we need to do better. So PSIG again is looking at what MI might be sensible to gather. And also scams aren't reported. They're not reported by people because they don't like to report it, particularly as there is a potential for a tax penalty, so people don't like to admit that they've been scammed and, you know, schemes don't like to report it either, so we've got a definite under-reporting problem, so we need to solve that.

But one of the biggest problems is actually the way that scammers get to people and today they get to people through online adverts. Some of them are impersonation and some of them are just outright lies and traps to catch people. But online financial harm is easy because there aren't any controls over it. Now we've been trying very hard along with others to have the online harms or Online Safety Bill changed and there's a little chink of light in that it might be in a couple of the social media platforms, search engines, have already said they will look at people who are placing financial adverts but that's a voluntary thing that some of them are doing.

I mentioned tax penalties and we still are pushing Treasury to think about a tax law change to stop penalising people who have been cheated and scammed into doing something they wouldn't otherwise do. They're not quite the same as people who go into, you know, some tax dodges, you know, whether it's, you know, loan schemes or whether it's, you know, film investments or whatever, there are lots of examples. Pension scam victims are not in that league at all but they're still being punished and we want to stop that.

And my final point really is we want to try and make it easier for bad guys to be spotted and we believe that we need an intelligence database for practitioners to use to put in the names of dodgy providers to… you'll be able to look at it and see if a scheme name looks like a dodgy one if it's on a list. It's a dangerous thing to do but there is quite a lot of open source data that can actually be input and used and, you know, we really feel that that ought to happen. We're working with Project Bloom to see whether it's something that we do ourselves for the industry because we have a lot of intelligence, we gather it through our, you know, sort of forum but it takes a bit of money so unless we can get some money from the industry it will be very difficult.

But that's sort of all I wanted to say on that but happy to answer any questions that come along.

Jason: Brilliant, thanks. To Margaret and Maddy for that comprehensive presentation into both what the regulations are telling us and also the background context to it all. We've had a number of questions in and I'll try and get through as many of them as I can. Apologies if we don't get to your question. Probably what I'll try and do is just group them into some themes and put them to Margaret and Maddy. So most of the questions are understandably very practical ones as to how to deal with this and perhaps the first theme I can pick up from the questions is around timing and delays and the amount of work that will need to go into this.

So a question maybe Maddy first to you in terms of do we expect trustees to have to be more flexible with guarantee periods, with the time periods in which they're going to be able to comply with the requirements here, and how do they deal with this sort of conundrum between members pressuring because they want transfers made and on the other hand having to do this protection?

Maddy: I think it's going to be one of the key issues that trustees are going to have to look at. I mean, there is an increased onus on the trustees to almost protect the members from themselves and there's still going to be the obligations to deal with these transfers within a prescribed period of time. The trustees may well want more flexibility but there's only a certain amount of flexibility within… to give the member what they want within the remit of the regulations, so I think this will be something that trustees, at least initially, will find quite tricky until the processes are bedded down and that they can almost smooth out amber flag processes to be able to focus on the red flag processes so that it ultimately hopefully won't be too much of an additional burden.

Jason: Thanks. Margaret?

Margaret: Yeah, I would agree with that. I know it's new and it's therefore a little bit tricky but I'd come back to the point that we're looking at only a small proportion of all the transfers that have been dealt with by administrators, trustees, providers, on a daily basis. So it's not looking at all of them but sometimes that's difficult, you know, to, you know, look at the ones, you know, all of them and decide which ones you want to spend your time on. But it may well need some extension of guarantee periods but I think not, but you know, I think it's down to us helping the industry to be as efficient as possible so that those resources aren't squandered, but it will come down to a level of confidence and it's not there yet.

Jason: Thanks, Margaret, and just picking up that sort of them, we're getting some questions about this which is that trustees are a bit stuck because they could be challenged both if they don't sort of spot a scam and let something through but equally members who are confident about where they want to take their money not being able to take their money somewhere so I question we are sort of getting is how do the trustees protect themselves from the challenges from members. You are saying you are just not moving fast enough or there is a delay or you going to cause me some loss there Maddy, what is the sort of way in which trustees should record what they are doing here?

Maddy: So I think we need to recognise actually that there is already lots of complaints to the Pensions Ombudsman about transfers and the fact that there is a delay in processing transfers that lead to member claims but they suffered a loss as a result. I think the trustee will need to show that it is actually in accordance with the regulations, that there has not been maladministration. I think the Pensions Ombudsman will apply the same standards to that as it currently does. I think that the interesting thing will be not only members who have still lost all their money because a scam was let through but as you say, members who have been red flagged so to speak and then have the complaint that actually I have completed lost out here I wanted to make this transfer and I have missed the boat but I think you just have to take comfort in the fact that actually the regulations might help trustees and put them in a better position than they are currently because they are more prescriptive on what is expected of trustees to do and provided that they do those things they should be protected from challenge.

Margaret: Again I think it is down to some practical solution and things like if a member asks for a transfer you know why not tell him at the outset that this various information is going to be needed and encourage him to get that information and proof and evidence that is needed up front rather than have it as a process which takes ages but I agree with Maddy. It I is a difficult one. You feel as if you are dammed if you do and dammed in you don't but you have to act reasonably and as I said you are not expected to be Hercule Poirot.

Jason: We have had quite a few questions around the overseas issue that you mentioned Maddy and I think first point for me just to pick up on a couple of the questions is that this overseas issue does unfortunately hits a larger number of transfers than we might have hoped because of the way that the regs were finally changed so if something is an occupational pension scheme or a kuros because it kind of falls into this issue unfortunately so it is quite a wide net. One of the questioners has asked, would you see it as proportionate and reasonable to overcome this issue which is from what we are hearing from TPR is just not one that was intended by effectively allowing people to either go to maps and you go through the statutory process and provide evidence or if there starts to become a backlog with MAPS use a non-statutory process whereby you kind of go with everything else we have done by the book of these regs the one thing that the number has not gone to do is go to MAPS because there is a backlog but we are going to go with that and this sis OK. Would that be a practical way forward or is that an uncomfortable thing for trustees to be doing. Maddy maybe start with you.

Maddy: OK so I am obviously going to give this the lawyer's view on it. That sounds like an entirely reasonable thing to do doesn't it? I mean trustees, everything else has been done. MAPS is a bit busy but I suppose you have to think about why would the trustee take that risk? Why would they, there would be a clear challenge to them that they have not done something that they are required to do by law and in the 95%25 of cases, that might be fine and you will never hear about it again but what if you do get those pocket of cases, it will be so clear that the trustee has not done something that it was required to do. I don't now Margaret whether you think I am being too restrictive, too lawyer-ish about that?

Margaret: I think you are exactly right and it is the issue we are grappling with in PSIG as well. You know you can't tell people to not follow the law. You are in a really difficult one but again I think we can apply, I hate to say it but we can apply a little bit of common sense and we know that if you are transferring to the Marks & Spencer's scheme that invests in global equities that that is not going to be a problem and we have got the absolutely silly situation that the answer for the pensions industry is to refer those cases to MAPS. What is MAPS going to be able to do? It is only going to say to people oh yeah you are transferring to Marks & Spencer and it has got overseas investments like every other scheme does. Yeah no problem. Go ahead and transfer so it is a completely useless bit of legislation but it is where we are and I would encourage people to take a reasonable view and trust that it will be sorted out because it is difficult. It is difficult.

Maddy: I do wonder if MAPS are going to have to get some pretty swift processes in place so that it does feel like you are passing the buck to MAPS but they are well OK we appreciate that the trustees need to do this because they are required to do it by law but our processes here are going to be super quick to pass this along.

Margaret: Yeah well MAPS will not necessarily know why something has been referred to them for guidance so I think it would be quite difficult but I think the problem with MAPS is that they do everything on face to face, not face to face but they do in person guidance calls rather than using technology. If they use technology then a lot of people could be passed, given a message about overseas investments and let them make up their mind so it is the fact it is quite labour intensive from MAPS I think is going to cause the biggest problem.

Jason: Yeah I think that is right and I can see that there might be something in the sort of green list plus non-statutory transfers just as a practical way of just keeping things moving and not causing complete backlogs.

Margaret: I think just to expand on that a little bit. As I said a lot of insured transfers are done on a discretionary basis so that means that the first thing they do is exercise discretion unless they find something that looks a bit dodgy and then they look to see if they can find a statutory a right that they can say doesn't exist whereas trustees tend to do it the other way round. They look at the statutory right first does that apply if not then go to discretion and DWP and the Regulator are trying to stop people going to discretion to get around the legislation so that sort of gives us a problem with trying to find a practical solution.

Jason: Yeah thank you, and just finally a question, we have a few questions in around the phrase Maddy you used around substantive response that he sort of received a substantive response and whether again how practically any help what that means?

Maddy: Interestingly I think the way that substantive response is talked about in the regs does not actually to me sound like a substantive response so I think there should potentially be less concern about the level of information that is given here. I think that reads that the members responding to you, the members giving you the information that you have asked for but it might not yet be sufficient so I think provided that you have got that dialogue going on with the members, the trustees won't be raising a red flag.

Margaret: Yeah I think that is absolutely right actually. You have got to be a bit reasonable on it and one thing to be reminded if a member actually lies and creates paperwork that is fraudulent they are not going to win in any challenge.

Jason: We are just about out of time I'm afraid. We have not managed to get through all the questions. Apologies if we have not picked up the theme of your question. We tried to pick up as many as we could there. Thank you for all those questions. Certainly the ones where people have given their names, we will endeavour to come back to you separately afterwards and if anyone who did not would like a specific answer to their question then do feel free to contact me or Maddy and we will certainly pick up with you individually on that but if I may say to Margaret and Maddy thank you so much for being with us today for that great session on this tricky practical topic I think and I hope that people out there are heartened by the comfort and the pragmatism and the fact that there is a job to do here for trustees but we do need to all help trustees find a way that keeps it proportionate and keeps the transfers going where we can. Thank you for your time. Thank you all for joining us and please if you can join us next Wednesday for the third and final in our volume 1 series. Thank you very much.