When you apply to transfer your benefits from the Plan to another arrangement, what checks does the Trustee need to do?
The Trustee needs to ensure that one of two statutory conditions are met before your transfer can be paid.
What are the conditions?
First Condition
For this condition to be met the Trustee must be satisfied that the transfer is being made to either:
- A public service pension scheme, i.e. a scheme for public sector workers; or
- A master trust, which is authorised by the Pensions Regulator and is included on their published list of authorised master trust schemes; or
- A collective money purchase scheme, which is authorised by the Pensions Regulator and is included on their published list of authorised collective money purchase schemes, which will be published.
The Trustee will only request such evidence or information from you as it requires to identify the correct scheme which will receive your transfer and confirm whether it believes the First Condition has been met.
If the First Condition is not met, then the Second Condition must be met for the Trustee to proceed with your transfer.
Second Condition
Where the transfer is being made to any other type of pension arrangement that does not meet the First Condition, including a Qualifying Recognised Overseas Pension Scheme (QROPS), the Trustee must check that certain flags are not present as part of the transfer. There are two types of flag, specified in legislation – red and amber.
Red flags indicate a heightened risk of a scam and, if any of them are present, then the statutory right to take a transfer will fall away and the Trustee will refuse to make the transfer.
Amber flags could be an indicator of a potential scam and will trigger the requirement for you to take scam specific guidance from the Money and Pensions Service (MaPs) and you will have to provide evidence that you have done so before the transfer can proceed. This will apply even if you have taken regulated financial advice from a financial adviser. Please note that if you fail to provide evidence of having taken the guidance, this will become a red flag and the transfer cannot proceed.
The information requested in the Member transfer questionnaire will assist the Trustee in assessing whether there are any red or amber flags. If you do not fully complete this form, then the Trustee may need to contact you again to obtain further information so they can complete their assessment.
What are the red and amber flags?
Red Flags
Examples of red flags are:
- You have taken financial advice from a firm or individual who does not have the necessary regulatory permissions to give advice on pension transfers
- Your request to transfer was following a cold call or unsolicited contact
- You were offered an incentive to make the transfer
- You were, or consider that you have felt, pressurised into making the transfer
- You fail to provide evidence or information in connection with the Second Condition (see below) or you fail to provide evidence that you have taken the required scams guidance from MaPs where an amber flag is present.
Amber Flags
Examples of amber flags are:
• There are high risk or unregulated investments included in the receiving scheme
• There are unclear or high fees being charged by the receiving scheme
• The structure of the investments in the receiving scheme are unclear, complex or unorthodox
• There are overseas investments included in the receiving scheme
• There has been a sharp or unusual rise in the volume of requests to transfer either to the same receiving scheme or involving the same adviser.
The Second Condition – evidence and information requirements
In addition to checking whether red or amber flags are present, further evidence and information may also be required to determine whether the Second Condition is met if the arrangement you are requesting a transfer to meets either (or both) of the following descriptions:
- it is an occupational pension scheme; and/or
- it is a QROPS
If this is the case, then the Trustee may require evidence or information from you to help demonstrate:
- the ‘employment link’ where the receiving scheme is an occupational pension scheme; or
- the ‘residency link’ where the receiving scheme is a QROPS that is not an occupational pension scheme; or
- either (i) the employment link; or (ii) the residency link where the receiving scheme is a QROPS that is an occupational pension scheme.
Employment link
To establish the employment link, you will need to demonstrate that:
- your employer is a sponsoring employer of the receiving scheme
- you have been continuously employed by the employer for a period of at least 3 months
- during your employment period your employment met a minimum salary requirement (it must be above the lower earnings limit for National Insurance purposes)
- during your employment period your employer has contributed to the receiving scheme.
The evidence that the Trustee will require from you to demonstrate the employment link will include an employer letter, a schedule of contributions or payment schedule, payslips and bank or building society statements. More information about the detail which needs to be covered by these documents is set out in the enclosed Transfer checklist.
If you are not able to demonstrate the employment link, then this will be an amber flag and will be treated as described above.
Residency Link
Where you are transferring to a QROPS you will need to demonstrate that you are resident in the country or territory where the QROPS is established.
The evidence that the Trustee will require from you includes:
- a copy of your formal residency documentation for the country or territory concerned; and
- at least two other documents confirming that you are resident in the country or territory where the QROPS is established. Where these documents are not in English you must provide a certified translation.
If you are not able to demonstrate the Residency link, then this will be an amber flag and will be treated as described above.
Notification from the Trustee
If the Trustee decides that either the First Condition or the Second Condition is satisfied, it will inform you of this no later than the date it confirms that the transfer has been made.
If it decides that neither of the statutory conditions are satisfied and your right to a statutory transfer has fallen away, the Trustee will inform you within 7 working days of reaching that decision.
