PSIG consultation: evolution or extinction?

Background

On 1 May 2024, the Pensions Scams Industry Group (“PSIG”) issued a consultation to determine the future of the organisation.

In this response

• General comments
• Responses to specific consultation questions

General comments

When PSIG launched its first Code of Good Practice (“the Code”) back in 2015, it was a gamechanger for the industry.  It was very much seen as the expected standard with both in-house and third-party administrators regularly using it as their “go to guide”, and us, as legal advisers, turning to it for practical suggestions when complex queries came our way.  The Pensions Ombudsman also refers to it when making determinations on pension scam cases.

In our experience, the Code itself is less heavily relied upon since the transfer regulations[1] (“the Regulations”) came into force on 30 November 2021, even after the “interim practitioner guide” was published in March 2023.  Given the challenge of interpreting the transfer conditions in practice, a further, fully updated version of the Code would certainly be a valuable reference point for administrators and decision-makers.  We believe PSIG still has an important role to play, with the breadth and depth of knowledge and experience on PSIG being an invaluable resource to the industry.

When reading the consultation, some of us were surprised at quite how much PSIG is doing.  As you will see in our responses below, given the limited resources and funding available to PSIG, we wonder if “less is more” and that a more focussed approach on fewer areas may be the way forward for the group.

[1] The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 (SI2021/1237)

Specific consultation questions

Section 1

1.      Do you use the PSIG Code of Good Practice as part of your transfer due diligence processes?

From our experience, administrators and decision-makers are not referring to the Code as much in their transfer due diligence processes since the Regulations came into force. In our view, some of the key reasons for this may be:

• In response to the coming into force of the Regulations in November 2021 (with limited lead-in time), administration practitioners (and to a lesser extent other industry providers and parties) developed their individual approaches to interpreting and implementing the requirements of the Regulations with, necessarily, limited reference to the Code because the Code had, understandably given timeframes, not been updated in light of the Regulations
• There is now, across the industry, a greater range of practical measures and approaches to scam detection and prevention than there was prior to the Regulations, including in relation to the more difficult, “debatable” or “ambiguous” aspects of the Regulations where different practitioners have taken different approaches to implementation in practice. The Code, and key areas of the subsequent interim practitioner guide, have been somewhat “left behind” by the range of measures that have been adopted in practice in response to the Regulations. Please see response to question 3 below.

2.      Does the PSIG Code of Good Practice add value to your business proposition?

N/A

3.      What improvements could be made to the PSIG Code of Good Practice?

The landscape for pensions transfers has changed dramatically since the Code was first published, particularly with the introduction of the Regulations, which created a detailed legal framework for pensions transfers. There has been difficulty in reconciling the policy intent with the drafting of certain statutory requirements (eg in relation to how trustees should approach a transfer to a scheme with overseas investments, or where an “incentive” is offered to the member), which we appreciate left PSIG in an unenviable position when updating the Code. However, the result is that the Code, updated on an interim basis in March 2023, is not as useful as a detailed reference point as it previously has been.

Format of the Code

As part of any improvements to the Code, we suggest taking a step back and considering how PSIG want the Code to be used going forward. Pension scammers are coming up with new scams all the time, so would PSIG want to have a “live” version of the Code online, like the Pension Regulator’s General Code of Practice, with the ability to make more frequent updates? A live version would be particularly helpful in capturing the practical examples and developments which we suggest below would improve the Code.

It may be that there are some areas we mention below, where PSIG wants to help the industry but doesn’t feel comfortable in giving a hard view. For example, inadvertently setting a benchmark in certain areas, eg high fees, or referencing a practical approach in relation to which there is not necessarily a settled view as to whether the approach meets the requirements of the Regulations e.g. not treating modest monetary cash offers from receiving providers, that are widespread across the industry, as an “incentive”. In such cases, an alternative could be for PSIG (perhaps as an output of the forum or in reports – see our responses below) to collate and share what the industry does currently in these areas, without going as far as giving a firm view on what they “should” be doing.

Suggested improvements

We set out below some areas which (i) improve the usability of the Code or (ii) are tricky areas on which we think the industry would welcome guidance.

• Integrating the Regulations and transfer processes

The interim guide explains the conditions in the Regulations, but it doesn’t link back in particularly well to the underlying administrative processes, eg to the due diligence process, particularly as the accompanying materials haven’t been updated. Part of the appeal of the original Code was that it was a “one stop shop” to take administrators through the transfer process.

• Interpreting the Regulations

Although the interim guide explains the conditions in the Regulations, it doesn’t “fill in the gaps” on interpreting the more ambiguous parts.  While they may be amended (see below), it is likely that some areas of uncertainty will remain.   One of the great benefits of the original Code was the input it gave on “knotty issues”.  Providing some examples of what could constitute “unclear or high” charges or fees, or “unclear, complex or unorthodox” investment structures and how these could be assessed as part of the trustees’ due diligence process would be really helpful to the industry.

While the Code may want to stop short of supporting or blessing particular approaches to such knotty issues, it could include examples of options which have been adopted in practice by practitioners and their pros and cons from a compliance and practical perspective.

• Practical resources for administrators

Administrators regularly used the additional materials provided alongside the Code in the “resources pack”. Indeed we, as legal advisers, would often direct administrators to the pack, particularly the “additional due diligence considerations” for the more complex transfers that came our way. It would be helpful if these could be revisited in light of the Regulations to see which should be updated and which should be retired.

We suggest using the responses to this consultation, and possibly follow up surveys, to understand which resources administrators would find useful to have updated. For example, administrators have already updated their standard letters and processes for the Regulations, so there may be limited value in providing template letters going forward. In contrast, we can see that administrators would still value suggested due diligence questions, so they can ensure that their processes are in line with current good practice.

• Support for trustees

A transfer can be referred by an administrator to the trustee for a decision, eg because the administrator’s standards processes aren’t comprehensive or because of a particularly complex fact pattern. However, trustees have little knowledge of what is appropriate for that situation. It would be useful to include some good and bad practices (or similar) on what is a “reasonable” share of risk that should be allocated between administrators and trustees, to help trustees make sure that decisions are being referred to them in an appropriate manner. It would also be useful to have an easy-to-use resource for trustees, who aren’t generally familiar with the Code, to help them navigate complex decisions.

Timing of changes

The DWP has been considering whether changes could be made to the transfer advice requirement to “improve the saver experience” following its statutory review in April 2023, and amending regulations had been expected by the end of 2023. Given this, we are not sure it would be an efficient use of PSIG’s limited resources to make significant updates to the Code before the amending regulations are published.

4.      Do you have any other comments on the PSIG Code of Good Practice, other than in relation to technical content?

We feel strongly that there is still an important role for the Code.  There are gaps in good practice and grey areas in the Regulations and, even when they are updated, there will still be areas of uncertainty.  It is incredibly valuable to have a Code of Good Practice (in whatever shape or form that may be going forward) that has been debated between knowledgeable people in the industry.  In our view, given the increased divergence of approaches in response to legislative and other changes relevant to detecting and preventing pensions scams, the Code could play vital central role drawing together views and good practice and tracking developments.

Section two – Pension Scams Industry Forum

5.      Do you participate in in the Pension Scams Industry Forum?

No, but we would be very keen to participate and would be happy to join. One of our partners has expressed a particular interest. Please do let us know if our involvement would be helpful.

6.      If you participate in the Pension Scams Industry Forum, does this add value to your business proposition?

N/A

7.      What improvements could be made to the Pension Scams Industry Forum?

N/A

8.      Do you have any other comments on the Pension Scams Industry Forum?

We understand the forum is really useful for the 85 or so attendees, who are able to share any new scam concerns and share good practice. However, there is no legal or regulatory pressure on those attending to update their processes in line with what has been discussed. Further, we are not aware that discussions from the forum are shared more widely across the industry, so there is a limit as to how much it could drive good practice and the Pensions Ombudsman isn’t able to refer to forum discussions when issuing determinations. It would be great if that information could be collated and shared with the wider industry, eg in a newsletter or report. Ideally the valuable findings would be given “higher standing” to help drive good practice.

Section three – Pension Scams Action Group (PSAG)

9.      Are you aware of PSIG’s participation in the Pension Scams Action Group?

Some of us were aware.

10.    Do you have any comments on PSIG’s participating in the Pension Scams Action Group?

We can see that it is helpful for PSIG to be in the Group to help share information, but we feel PSIG should let other organisations take the lead in any work the Group does, with PSIG focussing its efforts on helping the pensions industry combat pension scams.

Section four – Raising scam awareness

11.    Are you aware of the work undertaken by PSIG to increase awareness of pension scams?

Some of us were aware.  However, whilst pension scams are talked about at length in the pensions industry, we are aware that it can be difficult for pension scams to get the much-needed media attention in the wider space.  We aren’t sure that there is any quick fix to raise awareness with the public.

12.   Should PSIG increase, reduce or stop working to increase awareness of pension scams?

Given the limited resources of PSIG, and how widely respected it is within the industry, we wonder if PSIG should let others be the “face” of pension scams campaigns and raising awareness more widely, with PSIG focussing its efforts on helping the industry combat scams.

Section five – Industry Surveys

13.    What should any periodic PSIG report contain?

We think regular updates to the industry would be really useful.  Ideally, there would be regular industry surveys (or similar) with any reports then being able to cover:

• data on MoneyHelper referrals (eg number of referrals, what the referrals are for, current waiting times for appointments) and any trends in the data (eg increase or decrease in referrals)
• what practitioners are finding that is working well (eg trackers)
• examples of good and bad practices
• current transfer times
• intelligence on developments in pension scam tactics.

It would also be useful to have data collected from the industry to see how key issues, eg charging structures and overseas investments, are being addressed in practice.

Section six – Sharing Legislative & Regulatory Expertise

14.     How can PSIG most effectively share legislative and regulatory expertise?

If the question is aimed at sharing the expertise on PSIG itself, then talks and newsletters are both useful ways of sharing information (see question 16 below for an example of this).  The benefit of PSIG is the expertise within the group and its ability to gather industry wide data and develop good practice, we suggest this is focused on keeping the Code up to date, along with regular update reports, rather than expanding PSIG’s remit further.

15.     Which methods of knowledge sharing would you use?

As mentioned above, an up-to-date “live” website would work well, as long as any changes were flagged clearly.  We would also find industry surveys and PSIG reports useful – any method that shares intel would be welcomed.

16.     Should PSIG be members of relevant industry bodies?

While not essential, we can see the advantage of having PSIG members as part of relevant bodies, to help share information and good practice.  For example, several PSIG members are members of the Association of Pensions Lawyers (APL), and their presentation to the APL annual conference In November 2023 was thought-provoking and well received.

Section seven – Victim Support

17.    What should PSIG be doing to support pension scam victims?

As mentioned above, given PSIG’s limited resources, we don’t think that PSIG should be the “face” of pension scams, which would extend to giving support to pension scam victims.  In particular, providing one to one advice or support to a victim would be going beyond their original remit.

In addition, as so many bodies are involved in scams, dealing with a potential scam can be complex (eg the number of different bodies which it must be reported to).  So, we feel it makes sense to try and streamline the work everyone is doing, rather than adding to the remit of PSIG and risk making things even trickier.

It may be that PSIG can share some useful information or resources behind the scenes to any organisation that does help victims, and we would, of course, be supportive of PSIG sharing its knowledge in this way.

Section eight – Anything else

18.     PSIG has considered sponsoring an accreditation scheme where providers and schemes could demonstrate good practice on scams protection of customers and members with the award of a kite mark to those who complete an independent audit process. We have not progressed this because of lack of funds, but would the industry support such an initiative? Is there anything else which PSIG should be more involved with?

We would not suggest taking forward the idea of an accreditation scheme.  The industry already has the Pension Regulator’s Pledge to combat pension schemes and such a scheme could be undermined by certain providers being unable to sign up to it because, for example, they offer small incentives.

Section nine – Winding up

19.    Should PSIG wind up?

As mentioned in our general comments, we don’t think PSIG should be wound up, but we can see that this is a good opportunity to “take stock” and work out what its priorities should be.  We suggest refocusing on what made the Code so useful in the first place – ie providing up to date and practical guidance for current transfers and putting that into PSIG’s output (whether by way of an updated Code, up-to-date website, industry wide surveys and reports or other).

20.    If PSIG wound up, what would be the impact (if any) on pension scheme members and pension practitioners?

PSIG is of great value to the industry, and losing such a vast pool of knowledge and expertise would be a great loss to pension members and practitioners.

Part Two – Funding

Taking into account both the structure and the value you would place on the service provided, what are your views on how any funding should be structured, and what this would mean to you.  Suggestion for alternative viable funding structures and different combination are also welcome.

It is hard to consider how PSIG should structure its funding, until it has decided what to offer going forward.

However, when you start thinking about funding, we feel that membership fees could work.  This would give some certainty over the medium term as to PSIG’s funds.  However, for PSIG to continue to be a success, the information and material it produces needs to be freely available across the industry.  It could be that PSIG would ask pension practitioners to pay membership fees, with those signing up accepting that they will be subsidising those who do not.  Alternatively, you could offer “extras” to members, eg free or subsidised attendance at PSIG events or,  an entitlement to have a PSIG speaker to come and speak at an event or Q&A session for free.

Sponsorship and charging for events could also be options, but we suggest they sit alongside any membership scheme, as the income from these will be more unpredictable. We think “a la carte” funding would, in practice, restrict the reach of PSIG and act as a barrier to its widespread use.

Whatever option PSIG chooses, it will be important to keep the funding structure simple, otherwise its implementation and management will take up additional resource.