DWP leaves thousands of savers waiting months for their pension cash | Personal Finance | Finance
Three years ago, the Department for Work and Pensions (DWP) tightened up the rules around pension transfers over fears that people were being scammed when trying to move money out of their pension.
The rules involve using a traffic light system to flag up transfer requests – with amber the first sign that cash withdrawal could be seen as dodgy.
But Freedom of Information (FOI) data from the Money and Pensions Service (MaPS) shows that since 2021 the DWP has tightened the regulations up so much that even relatively low-risk withdrawals involving small amounts of cash have been flagged up as potentially criminal acts.
This has meant thousands of pensioners have had their transfer needlessly delayed.
Financial and pensions adviser Quilter, said its FOI had revealed 27,900, or four out of five, out of a total 33,917 transfers that which were given an amber flag by the DWP were being raised for either an unknown reason or for a potentially low risk transfer relating to overseas investments.
Quilter, submitted the request asking for infomation spanning the full three years since the regulations were introduced.
Quilter said the regulations have prevented many savers losing their money and a huge number of pension transfers that have been needlessly interrupted, and the knock on impact this has had on pension savers, greatly clouds its success.
More than 30,000 pension savers who attended MoneyHelper Pension Safeguarding Guidance (PSG) sessions to help almost half were unaware why an amber flag had been raised on their pension transfer.
A further 12,223, or more than a third, were due to a flag being raised on potentially low-risk transfers relating to overseas investments.
Quilter said it was reiterating its call for the DWP to ensure there were changes are implemented swiftly to improve the pension transfer experience, but also implores HMRC to review its rules and for Parliament to change the relevant tax law to prevent more people being unfairly disadvantaged.
Jon Greer, head of retirement policy at Quilter, said: “ As a matter of urgency, the DWP must act to resolve the current divergence between policy intention and the practical application of the law when it comes to the overseas investments wording to provide clarity on the distinction between those investments that present a scam risk versus those that do not.
“Ultimately, pension savers have suffered needless delays for three years, and it is time the DWP put a stop to it.”
A DWP spokesperson said: “These transfer rules help protect people from fraudsters trying to trick them into moving their pension pots into scam accounts and are estimated to have prevented around 2,000 fraudulent transfers.
“They must strike the right balance and we continue to look at ways to make sure they are providing the necessary protection for pension savers against scams, while ensuring they still have freedom and choice about where their savings are invested.”
The Financial Conduct Authority has published an online guide to pension scams.
If you think you’ve been the victim of a pension scam email: Samantha.Downes@reachplc.com