On the go: The number of scam warnings on defined benefit transfers is near a record high, despite a downward trend in transfer activity, XPS Pensions Group has said.
The XPS Red Flag Index identified that in March, seven in 10 (70 per cent) of transfer requests made during the month exhibited indicators of a scam.
This rise represents the third consecutive monthly increase in the scam warning flags, which are up from two out of every three requests in February.
XPS said it was the highest rate of scam flags since December 2020, when 76 per cent of requested transfers showed a sign of a scam.
Helen Cavanagh, member engagement hub client lead at XPS Pensions Group, said: “We are continuing to see that the updated transfer regulations are having a significant impact on the volume of scam warning flags that are being observed.”
Regulations introduced in November 2021 by the Department for Work and Pensions give trustees and scheme managers the power to halt a transfer if they deemed necessary by raising a “red flag”.
In addition, they could also raise an “amber flag” if they suspect a potential scam, meaning the member would then have to provide evidence they have taken specific scam guidance from the Money and Pensions Service before they are allowed to transfer.
Cavanagh added: “While the volumes of transfers that are being stopped from proceeding under the regulations are low, many of the flags seen require the member to seek additional scams guidance from MoneyHelper, so there will continue to be pressure on the service to provide guidance to all these members in a timely manner.”
Data from XPS also revealed a recent downwards trend in transfer activity in March, falling to a rate of 38 in every 10,000 members transferring per year, down from 40 in the previous month.
There was also a fall in the Transfer Value Index, with the month-end average at £245,000, a fall of 2 per cent compared with February and 9 per cent lower than the peak in November 2021.
Mark Barlow, head of member options at XPS Pensions Group, said: “Members tend to be more cautious in times of economic uncertainty, so it is not surprising that transfer activity continues to fall.
“We are concerned that, although transfer activity has fallen recently, the current cost of living crisis could lead to members looking to access their benefits, leaving them vulnerable to poor outcomes or, at worst, a scam.”
Although inflation expectations increased over March, a continued rise in gilt yields resulted in an overall fall in transfer values.
This article originally appeared on FTAdviser.com
