This article was written by Louise Pettit and Alex Manser 

The verdict?  Generally, the provisions are working well but room for improvement in some key areas 

With the end of the school year (and the Parliamentary summer recess) on the horizon, it’s timely that DWP has published its 'end of term' report analysing the performance so far of the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 (the “Regulations”).  18 months on from their introduction in November 2021, it’ll come as no surprise to Trustees and scheme managers and administrators that whilst the overall verdict is that the Regulations are working well there is some room for improvement, particularly in relation to the operation of the ”overseas investments” amber flag and the “incentives” red flag.

Recap: What are the Transfer Check Requirements?

The Regulations were introduced with the aim of preventing or minimising the risk of a member transferring into a scam pension scheme.

Under the Regulations, Trustees and scheme managers of occupational and personal schemes are required to ensure that at least one of two conditions are met before processing a statutory transfer request – the so called 'transfer check requirements'. The Regulations operate so that trustees cannot process a transfer request and members lose their right to a statutory transfer if the conditions are not met.  Under the second condition, Trustees have to test whether a range of Amber and Red flags apply to the transfer – if an ‘Amber flag’ is identified, the member must be referred for guidance and if a ‘Red flag’ is identified, the statutory transfer right is lost and the transfer cannot take place.

It was estimated, before implementation, that approximately 470,000 transfers per year would be impacted by these Regulations.

For a more detailed look at the Regulations, please see our February 2022 Pensions Law Summary.

The review

The DWP conducted an 18-month review focussing on the appropriateness and effectiveness of the Regulations, including whether there is a need to amend the requirements and whether there has been any change in the nature of scams schemes are seeing.  Gathering both qualitative and quantitative feedback, the DWP worked closely with representatives across the pensions industry to understand how the Regulations are working in practice.


The report concluded that overall feedback from the pensions industry was positive.  Generally it was shown that the Regulations are delivering on the policy objective of preventing or minimising the risk of someone transferring into a scam pension scheme.

It is estimated that the Regulations have stopped approximately 2,000 transfers taking place which may have been scams/fraudulent. The feedback gathered also suggested that there has not been a change in scam types employed by fraudsters.

However, notwithstanding the generally positive industry response, the report card for the Regulations was not completely unblemished.  It was noted that feedback suggests that the practical application of certain provisions in the Regulations are causing delays and issues for pension savers, as well as trustees and scheme managers.

The key areas of concern identified included:

  • Overseas investment amber flag – feedback suggests that this amber flag needs to be amended or removed as the current drafting of the Regulations requires schemes to raise an amber flag even where no concerns regarding scam risks exist;
  • Incentives red flag – this red flag is currently incorrectly blocking transfers due to different interpretations held by different providers; some clarification or amendment is needed;
  • Evidence requirements for the “employment link” have been described in the feedback as excessive.
  • Transfers are taking longer due to the additional due diligence checks required and longer waiting times for MoneyHelper appointments – transfer times have increased from 2 to 6 weeks on average over the period of the Regulations.

Red and Amber flags

For anyone with practical experience of navigating the Regulations, it’s unlikely to come as a surprise that the 'overseas investments' amber flag and the 'incentives' red flag were identified in the review as the most problematic provisions for pension savers, trustees and scheme managers.

Currently, an amber flag is raised when the scheme to which the member wishes to transfer includes overseas investments. As many pension schemes include overseas investments, it means that an amber flag can exist even when the transferring scheme has no concerns. A prime example being investment in global equities. The review reported that 57% of the amber flags that were raised related to the identification of overseas investments. The large volume of amber flagged transfers, requiring referral to MoneyHelper, has undoubtedly contributed to increasing waiting times for guidance, which in turn could affect investment decision-making.

In respect of the incentives red flag, the term 'incentive' has not been extensively defined within the Regulations, and so many trustees have been forced to adopt a more cautious approach to their interpretation. The existence of different interpretations held by different providers is problematic and leads to uncertainty which will only increase delays for pension savers, trustees, and scheme managers. Clarification of the meaning of 'incentive' would certainly be widely welcomed.

What next?

The DWP intends to conduct further work with the pensions industry and the Pensions Regulator to consider if changes could be implemented to the regulations to improve the pension 'transfer experience', without undermining the original policy intent.  However, no timetable for the changes has been confirmed, which has disappointed many hoping for an imminent fix.

In the meantime, pending any amendments to the Regulations, Trustees, scheme managers and administrators will continue grappling with the current drafting of the amber overseas' and red 'incentives' flags. 

If you would like any advice in relation to a suspicious transfer, a transfer where you think a red or amber flag might apply or on the application of the Regulations more generally please do get in touch with your usual contact in the Pensions Team.