Pension transfer delays ‘needlessly’ hit tens of thousands of savers as DWP urged to take ‘urgent action’
TENS of thousands of savers have been hit by "needless" delays to their pension transfers because of Department for Work and Pensions (DWP) rules, The Sun can reveal.
According to a freedom of information (FOI) request by wealth firm Quilter, shared exclusively with The Sun, 33,917 pension transfers have been delayed in the past three years because of the DWP rules - in many cases for no reason at all.
A pension transfer is where you move one of your pensions to another provider. You might want to transfer your pension to move to a scheme with lower fees or to put all your savings in one place, for example.
The DWP introduced rules in 2021 requiring pension firms to raise a so-called "amber flag" if they had concerns about a pension transfer, such as that a saver may be moving money into scam investments or paying excessively high fees.
Savers are then required to book a scam guidance session with government-backed MoneyHelper before they can go ahead with the transfer.
But the pensions industry has complained that these rules are being mis-applied to transfers that are low-risk, meaning many savers are facing months of delays unnecessarily.
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Indeed, the new FOI data shows 15,677 of the transfers blocked between December 2021 and October 2024 were delayed due to "unknown reasons", meaning no specific reason was given.
The next most common reason for raising amber flags included the presence of overseas investments in the pension fund, with 12,223 transfers paused for this reason, according to the FOI data from the Money and Pensions Service (MaPS).
But overseas investments aren't a cause for concern in and of themselves. In fact, most funds contain some form of overseas investments.
In total, 27,900 pension transfers where an amber flag was raised - four out of five - were delayed either for an unknown reason or for a potentially low-risk transfer with overseas investments.
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Meanwhile, just over 3,000 were delayed because of "unclear or high fees", while 1,885 were paused for "high risk/unregulated investments" and 638 were blocked because of a "complex investment structure".
Earlier this year, we revealed that the DWP is working on re-drafting the wording of its rules to stop transfers being delayed unnecessarily, but experts say these changes need to be implemented far more quickly to prevent further issues.
Insiders involved in discussions with the DWP have previously said it is seeking parliamentary time to push changes through, but no timeframe has been confirmed yet.
Jon Greer, head of retirement policy at Quilter, said: "For three years now, the industry has been repeatedly highlighting the issues that pension savers are coming up against as a result of the unnecessary points of friction within the DWP’s regulations.
"A growing number of people have been negatively impacted as their pension transfers have been needlessly halted for what is often no real reason.
“The DWP has claimed it is working to consider whether the rules could be improved, but with no indication of a timeline, it seems more and more people will face undue disruption.
"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."
Alex Campbell, director of communications at investment platform Freetrade, added that while checks are "critical" during pension transfers to prevent scams, the FOI data suggests the current rules are actually creating "poor outcomes" for savers.
"The rules are not being applied as they were intended and the knock-on effect is that customers are left unable to move their pensions to their chosen provider within a reasonable time frame," he said.
Responding to the new FOI data, 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 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.”
What is the issue with the DWP rules?
In November 2021, the DWP introduced legislation to require the trustees of a transferring pension to raise an "amber flag" if they had concerns about the transfer.
Trustees are responsible for looking after pension savers' funds by ensuring schemes are run properly and the cash is safe.
Raising an amber flag pauses a transfer until any issues are investigated and the saver attends an appointment with the government-backed MaPS.
The rules were intended to help prevent scams, as pension funds are commonly targeted by fraudsters.
But the ambiguous way in which they are worded as resulted in thousands of potentially low-risk transfers being significantly delayed, frustrating savers trying to switch their pensions legitimately.
It is understood the DWP is considering amending the following part of the rules: "Amber flag where there are any overseas investments included in the receiving scheme".
One insider previously told The Sun that this wording was "clearly not intended to be taken literally or else no transfers would ever occur".
In a review of the regulations published over a year ago, the DWP acknowledged this wording was causing delays and issues for savers.
Why do people transfer their pension?
There are a number of reasons why you might want to transfer your pension.
A pension transfer is where you move one of your pensions to another provider, or merge pension pots together.
You might choose to do this to keep all your pensions in one place, as changing jobs can leave savers with several different pots and it can be difficult to keep track of them.
Putting all your pensions in one place may also reduce the fees you pay, as different schemes come with different charges.
You might also just decide to swap your pension from one provider to another to lower your costs.
Older schemes tend to have higher fees, so transferring old pensions to a new scheme could reduce the charges you pay.
How to complain if your pension transfer is delayed
If you feel your pension provider or financial adviser are taking too long to transfer your pension, complain to them directly.
Say you're making a formal complaint and provide any evidence to back up your claim, such as when you first asked to transfer and any correspondence since then.
You can then complain to the Financial Ombudsman Service (FOS) if you aren't satisfied with the outcome.
The FOS manages disputes between financial firms and customers, and if it upholds your complaint it will ask the firm to compensate you.
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According to the FOS, unnecessarily long delays that cost you money are a legitimate reason for complaining.
However, you must complain within six months of receiving a final response from your provider.
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