Good News for Pension Scheme Transfer Governance?

The Department for Work and Pensions (DWP) has published its consultation on amendments to the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 (the ‘Transfer Regulations’). The proposed amendments are aimed at both further protecting pension savers and alleviating some of the governance burden in areas where the prior regulations have been applied narrowly in practice. In our view, they sensibly introduce more targeted controls in higher-risk areas, alongside greater discretion for trustees in assessing lower-risk transfers.

The consultation runs until 21 July 2026.

Red flag for transfers to Small Self-Administered Schemes (SSASs) without an employment link

The consultation proposes a targeted change to address emerging scam risks in the SSAS market. A new red flag will arise where, although a member has provided the requested evidence, that evidence does not demonstrate an employment link with the receiving scheme.

This is a notable shift from the current position, where issues with employment link evidence would more typically give rise to an amber flag (requiring Money and Pensions Service (MaPS)  guidance) rather than a red flag preventing the transfer from proceeding. 

While the policy intent is clear, the regulations do not prescribe what constitutes sufficient evidence of an employment link and the consultation does not seek to clarify this. Trustees will therefore continue to make a judgement based on the evidence available, but with more significant consequences where they conclude the test is not met. In practice, this places greater emphasis on trustees’ evidential assessment and may give rise to inconsistency and potential challenge where transfers are refused, as we see in other areas.

Addition of ‘reputable’ pension schemes 

The DWP has undertaken a review of how the Transfer Regulations have operated in practice which highlighted that, while well‑intentioned, operational challenges may have at times created unnecessary friction for legitimate transfers. 

There are a number of easements being introduced to help trustees to make more expedient transfers where they have no concerns that the receiving scheme may pose a risk, and to help members when consolidating pension pots.

The first easement involves adding ‘reputable' pension schemes to the list of recipient schemes which will satisfy the First Condition under the Transfer Regulations, alongside master trusts and public service pension schemes.   Where recipient schemes fall within the First Condition, this enables a transfer to proceed without needing to go on to assess the position under the Second Condition which involves consideration of red and amber flags.

This widening of scope within the First Condition is welcome, although it will be for the trustees to determine whether they are satisfied, on the balance of probabilities, that the transfer is to a reputable scheme. To assist trustees in determining what constitutes a reputable scheme, the amending regulations include a non-exhaustive list of factors to take into account. This includes:

• 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

Any ‘clean list’ of schemes which the trustees are comfortable to make transfers to under the First Condition will need to be kept under review and assessed regularly. This is a potentially material task for trustee boards and they may need to engage with professional advisers to assist. As a first port of call, we consider trustees should discuss with their scheme administrators whether they intend to hold a central list for all their administered schemes which trustees can adopt if they are comfortable, or whether trustees will need to create their own list on a scheme-by-scheme basis.

Money and Pensions Service (MaPS) guidance relaxation

In a welcome relaxation, members who have taken MaPS guidance within the last 12 months will be exempt from repeating it when consolidating multiple pension pots. This is being introduced to remove unnecessary duplication and improve the member experience which we agree is a pragmatic approach.

Removal of overseas investment amber flag

Over a third of safeguarding appointments held with the MaPS in 2025 were triggered solely by the presence of an overseas investment flag. The planned removal of the overseas investment amber flag will likely be met with open arms by trustees, providers and MaPS alike! The remaining investment-focused amber flags already require trustees to assess whether the receiving scheme includes high‑risk or unregulated investments, or unclear, complex or unorthodox investment structures, which is the key concern rather than the overseas nature of the investment itself.

Red flag on incentives to be retained

There have been repeated calls for some form of easement on the incentives red flag in place. Whilst the intention is clear to protect individuals who are offered a ‘too good to pass up’ enhancement to transfer their pension savings into a vehicle which turns out to be a scam, in practice small incentives to move money to new providers is commonplace across various financial services products. 

Members transferring to well-known pension providers, with whom they may already hold assets, have been frustrated by anti-scams processes due to a nominal cash incentive for transferring.  The consultation recognises these challenges, and notes that the addition of the ‘reputable’ schemes category within the First Condition should enable such transfers to proceed more smoothly without removing the incentives flag altogether which continues to be recognised as an ‘important and effective scams indicator’.

What else can we expect on the scam-prevention front?

The consultation paper confirms that work is progressing to understand emerging threats and limit avenues for misuse across Government, regulators, law-enforcement partners and industry. The DWP expects to build on this engagement over the next 12 months and notes that should further measures be required they will take action – watch this space!

This article was written by Trilby James and Rachael Skuse

"This work has identified areas where targeted amendments would strengthen the effectiveness and clarity of the transfer conditions, including a specific response to an emerging risk and a set of procedural refinements addressing operational issues raised by trustees and administrators."

https://www.gov.uk/government/consultations/protecting-pension-savers-proposals-to-amend-the-occupational-and-personal-pension-schemes-conditions-for-transfers-regulations-2021/protecting-pension-savers-proposals-to-amend-the-occupational-and-personal-pension-schemes-conditions-for-transfers-regulations-2021