Two-thirds (60%) of defined benefit (DB) pension transfers triggered a ‘red flag’ warning for potential fraud or scams last month but the figure was down from December’s record-high, data from XPS Pensions showed.
The consultant’s Transfer Watch revealed red flags for pension scams were at 60% in January this year, a fall from the record high 76% the month prior.
However, this number remains high in light of the hike in scam concerns across the pensions industry. By comparison, in February 2020 the pension scam red flag index sat at 34%.
XPS’ Transfer Watch – which monitors how market developments have affected transfer values for a typical pension scheme member – also revealed transfer values remained stable for the start of the year.
The transfer value index showed a slight, but steady, fall sitting at £254,000 from £259,000 in December 2020 and £256,000 the month prior. The index shows little change over the year with values sitting at £250,000 in February 2020.
Additionally, the transfer activity index dropped to 0.62% in January from 0.69% the month prior while February and March 2020 activities were at 0.89% and 0.76% respectively.
XPS consultant Helen Cavanagh said: “While the incidence is down, the breakdown between causes of red flags remains similar. The fall may signal a return to more ‘normal’ transfers, with fewer members looking to get hold of pension savings quickly, a reason that drove some transfers at the start of the pandemic.
“We are investigating this as it could reinforce the importance of members being informed and aware of options and costs during the transfer process.”
Partner Mark Barlow added: “With red flags remaining at such a high level, the new powers that will be introduced by the imminent Pension Schemes Act cannot come soon enough. The act will allow future regulations, expected later this year, to impose conditions on a member’s statutory right to transfer.
“Getting these conditions right will be crucial in giving trustees and employers enough power in the fight against pension scams.”
This follows the launch of The Pensions Regulator’s scam pledge initiative which was set up to encourage trustees to commit to a step up in processes to protect member interests and combat pension scams after Action Fraud revealed more than £31m has been lost to pension scams in just three years.