The Government is consulting on proposed amendments to the Conditions for Transfer Regulations to address emerging SSAS scam risk and operational issues
Consultation on amendments to the Conditions for Transfer Regulations
Following the DWP’s 2023 review of the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021, the Government is proposing to amend the regulations to address:
- emerging small, self-administered scheme (SSAS) fraud risk; and
- several “operational issues” with the regulations.
Recap of the transfer process
As a reminder, the regulations require trustees to determine if the transfer is a First Condition transfer (one to a public service scheme, authorised master trust or collective money purchase scheme) and if not, if scam indicators in the form of red or amber flags are present (see our previous insight). The presence of a red flag prevents the transfer going ahead, and an amber flag requires the member to take MaPS (Money and Pensions Service) guidance before they can transfer.
Concerns and proposed response
New red flag for SSAS no-employment link cases
- Concern: Evidence of “deliberate and organised misuse” of SSASs has been identified whereby up to 1 in 10 of an average of 100+ annual transfers into SSASs are being used to dress up pension liberation as legally compliant investments.
- Proposal: Introduce a new red flag where the evidence does not demonstrate the required employment link, on the basis that the absence of that link is a strong sign that the SSAS is “operating outside its legitimate purpose”.
New First Condition for transfers to reputable scheme
- Concern: The First Condition framework is too narrow and forces trustees to consider the presence of flags even where there are no scam concerns.
- Proposal: Introduce a new First Condition for transfers to a reputable scheme, allowing trustees to proceed where they are satisfied, on the balance of probabilities, that there is no fraud risk. Trustees will need to be satisfied of this on the balance of probabilities (rather than the stronger ‘beyond reasonable doubt’ standard of proof).
The regulations would include a ‘list of non-exhaustive factors’ relevant to whether a receiving scheme is ‘reputable’. These are likely to include:
- “whether there is an existing relationship with the receiving scheme
- the nature and risk profile of the scheme’s investments
- any prior warning flags or regulatory concerns
- the level of transparency around fees and charges.”
12-month MaPS guidance easement
- Concern: Members having to attend multiple MaPS guidance appointments when consolidating pension pots with no associated additional protection.
- Proposal: Introduce a concession so that a member does not have to take MaPS guidance again if they have taken guidance within 12 months of receiving the transfer request.
Removing overseas investments amber flag
- Concern: An overseas investment amber flag is raised even where there are no scam concerns resulting in the flag catching more transfers than intended.
- Proposal: Remove current overseas investment amber flag as the current high-risk/unregulated investments and unclear, complex or unorthodox investments amber flags already address the relevant risk.
Incentives to remain as red flag
- Concern: Incentive red flag is wrongly blocking certain transfers.
- Proposal: Although some incentives can be legitimate, others can form part of a scam. Removing this flag would reduce protection. However, introducing a transfer to a ‘reputable scheme’ as a First Condition transfer means that a transfer involving an incentive could go ahead if there are no identifiable scam indicators and the trustees “believe the receiving scheme is safe”.
Next steps
The consultation on the proposed changes will end on 21 July 2026. The Government appears to have taken account of feedback and responded constructively, including by addressing the unintended impact on low-risk transfers, particularly those involving overseas investments, and also tackling emerging SSAS risk. Trustees and administrators will need to update their transfer processes and systems to reflect the changes. However, the latest changes are unlikely to be the last, given scammers will continue to adapt their tactics to circumvent existing protections.
Later this year, the Government will also consider broader transfer issues, including how to modernise processes and help members make better-informed transfer decisions.