NEWSLETTER    |     March 21, 2024

PO determination – transfers involving overseas investments

Recent Pensions Ombudsman determination supports trustees taking a low-risk approach to ‘amber flag’ transfers involving overseas investments, in the face of legal uncertainty.  Is it time to revisit scheme practice?

Regulations introduced in 2021 require trustees to consider whether there are any ‘red’ or ‘amber’ flags when a member applies for a statutory transfer value, which in turn affects whether the transfer can proceed.

There is an ‘amber’ flag present where the trustee of the transferring scheme decides there are overseas investments included in the receiving scheme. Most schemes include overseas investments, and the DWP and the Pensions Regulator have issued guidance which suggests the intention was not to prevent transfers where there is a low risk of a scam. However, guidance does not override the legal requirement as set out in the Regulations.

In a recent Pensions Ombudsman determination concerning the Western Power Distribution Pension Fund, which is the first of its kind involving these Regulations, a member requested a statutory transfer to a UK personal pension which offered various global funds as investment options. The trustee of the Fund flagged this as an ‘amber’ flag, following a strict application of the wording of the Regulations, and referred the member to the MoneyHelper service accordingly. The member complained that this was an incorrect interpretation of the Regulations which caused undue delay and a fall in his transfer value. The Ombudsman rejected the member’s complaint, saying the trustee did not act unreasonably.

Unless and until the Regulations are amended, we recommend caution in relation to any transfers where an overseas element is present.

Key takeaway

Trustees should ensure that they are comfortable with the approach taken by their scheme administrators in relation to transfers with an overseas element and may wish to consider taking legal advice to understand the options and potential risks.

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