Pension transfer refused due to incentive

CrockettnTubbs

I have a small defined contribution pension from a prior job. It's sitting with a pension provider that offers a limited set of high fee funds. Hargreaves Lansdown are currently offering attractive cashback rates for transfers so I thought I'd consolidate this old pension into an existing HL SIPP.
 - less bureaucracy consolidating statements from different providers
 - more choice of funds
 - less of my pot going on fees
Win, win, win.

The transfer request has been rejected "for the safety of your pension savings". A red flag has been raised as I'm being offered an incentive to transfer.

I'm aware I'm being offered an incentive, I want the incentive! Surely this isn't the intention of the new transfer regulations? My pension is being held hostage by a rubbish provider and I'm in danger of missing out on a nice cashback boost.

Anyone else experienced this and if so how did you navigate?

Thanks!

vacheron

That sounds ridiculous. Why would HL even offer an incentive if by doing so they prevented a transfer?

I could almost understand if you were trying to move a DB pension, but not a DC. 

I would send them back a message saying "I am moving my pension becuase of your high fees. the "incentive" was merely an incidental bonus, please proceed with my original instruction!"

Tommyjw

Who is it currently with ? This is one of the situations where they are taking the guidance too literally, and I would expect any firm to realise what the true purpose of this red flag is.

It has gone back to DWP regarding wording but there is still no update on it

https://www.sackers.com/blog/dwp-review-of-transfer-conditions-regulations-published/

But of course normally everybody is taking a reasonable approach to the flags and what they are intended. Obviously this is not you being promised a car and a nice holiday to transfer..

Ultimately, you'd have to complain and see where it gets you but as of right now i am happy to be corrected but my understanding is, by the letter of the law so to speak due to the awful way the flags are worded, they are following the regulations and have a right to refuse it (just.. to an exact and far too literal way) and say there's no subjectivity in their review whatsoever however bonkers that is

dunstonh

The transfer request has been rejected "for the safety of your pension savings". A red flag has been raised as I'm being offered an incentive to transfer.

it hasn't been rejected. It has been delayed with a few extra hoops to jump through.

HL will have multiple warning flags
1 - offshore investments 
2 - incentives.

 Surely this isn't the intention of the new transfer regulations?

It wasn't the intention but cashback incentives are rare.  Probably rarer than the scams that offer incentives they are trying to avoid.

My pension is being held hostage by a rubbish provider and I'm in danger of missing out on a nice cashback boost.

Its not being held hostage.   It is being delayed until you complete the remainder of the steps.

Anyone else experienced this and if so how did you navigate?

follow the instructions.   There is no alternative way around it.  The guidelines are largely flow chart style.

NoMore

This is the similar to people being refused transfers because they are moving to invest in bog standard Global Trackers and one of the flags is 'overseas investments'. Its madness how some companies are interpreting the guidelines. 

EDIT: Just read Tommyjw's link and the two things of concern over interpretation are incentives and overseas investments

Marcon

CrockettnTubbs said:

I have a small defined contribution pension from a prior job. It's sitting with a pension provider that offers a limited set of high fee funds. Hargreaves Lansdown are currently offering attractive cashback rates for transfers so I thought I'd consolidate this old pension into an existing HL SIPP.
 - less bureaucracy consolidating statements from different providers
 - more choice of funds
 - less of my pot going on fees
Win, win, win.

The transfer request has been rejected "for the safety of your pension savings". A red flag has been raised as I'm being offered an incentive to transfer.

I'm aware I'm being offered an incentive, I want the incentive! Surely this isn't the intention of the new transfer regulations? My pension is being held hostage by a rubbish provider and I'm in danger of missing out on a nice cashback boost.

Anyone else experienced this and if so how did you navigate?

Thanks!

Red flags are there to protect you - even when you don't want to be protected and even when the 'protection' results from poorly worded legislation! In virtually all such 'innocent' cases, a referral to MoneyHelper resolves the issue: https://www.moneyhelper.org.uk/pension-safeguarding

Forget the drama and book your appointment!

NoMore said:

This is the similar to people being refused transfers because they are moving to invest in bog standard Global Trackers and one of the flags is 'overseas investments'. Its madness how some companies are interpreting the guidelines. 

No, it isn't madness. Guidelines are just that; but in most cases these are legislative requirements, meaning any scheme which doesn't follow them is automatically on the hook if anything goes wrong.

Tommyjw

Not sure jumping straight to MoneyHelper helps in any way, that's a step designed for Amber flags that is required to have that further appointment, and serves absolutely no purpose in the designation of something being a red flag.

Red flags are just simply a straight no (unless the scheme decides to treat it with some subjectivity which has its own risks for them)

xylophone

This appears to be a standard DC pension with no safeguarded benefits.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/transferring-your-defined-contribution-pension#:~:text=You can normally move a,take money from the pension.

When can I transfer my pension pot?

You can normally move a defined contribution pension at any time before you start taking money from it. You can check with your provider if there are any restrictions for your specific case.

There is no mention of there being any such restrictions? No safeguarded benefits ( S32/GAR)?

If there were no incentive, would a red flag have been raised?

dunstonh

This is the similar to people being refused transfers because they are moving to invest in bog standard Global Trackers and one of the flags is 'overseas investments'. Its madness how some companies are interpreting the guidelines. 

That shouldn't happen.   The "overseas" part refers to the domicile of the investments.  Not the investments themselves. i.e. domiciled in Ireland or Luxemburg.  

Amber flag 6: Overseas investments are included in the scheme is also easily overcome by the moneyhelper meeting and confirmation that no overseas investments are being used or providing information of what overseas investments are being used if they are.

The specific concern here is not whether the investment is in, for example, a global equity fund but whether the investment is in assets or funds where there is a lax, or non-existent, regulatory environment or in jurisdictions which allow opaque corporate structures. After carrying out due diligence you may consider the transfer is at a low risk of a scam and, where your scheme rules allow, you may consider granting a discretionary transfer.

red flag 5 (incentive to transfer) allows the provider to use discretion and carry out their own due diligence.     This should be easily overcome with HL providing the necessary information.

Mainstream providers don't seem to have a problem with the regulations.   However, some auto-enrolment schemes and professional administrator schemes are going over the top and applying as little discretion as possible.   Where this is the case, the complaints process should be used as checking whether it is a scam or not is actually very easy most of the time.

Pat38493

Tommyjw said:

Not sure jumping straight to MoneyHelper helps in any way, that's a step designed for Amber flags that is required to have that further appointment, and serves absolutely no purpose in the designation of something being a red flag.

Red flags are just simply a straight no (unless the scheme decides to treat it with some subjectivity which has its own risks for them)

I am assuming this DB is worth less than £30K.  So are you saying that the DB provider can use this loophole to block the request completely and nothing can be done about it?

If the OP puts in a transfer request to a provider that isn't offering cashback - will they then say it's a red flag because the inbound provider is offering reduced or no charges for x months as most of them offer at least some kind of incentive like that?

You will probably struggle to find a DIY provider who isn't offering some kind of incentive to transfer in, even if it's just a few months of free platform fees.

WYSPECIAL

Pat38493 said:

Tommyjw said:

Not sure jumping straight to MoneyHelper helps in any way, that's a step designed for Amber flags that is required to have that further appointment, and serves absolutely no purpose in the designation of something being a red flag.

Red flags are just simply a straight no (unless the scheme decides to treat it with some subjectivity which has its own risks for them)

I am assuming this DB is worth less than £30K.  So are you saying that the DB provider can use this loophole to block the request completely and nothing can be done about it?

OP states it is a DC scheme