On the go: More than half of pension transfers carried out post-lockdown have flagged scam warnings, research from XPS Pensions has shown.
According to the pensions consultancy, there has been a significant increase in the number of scam warnings on transfers, with only one in eight cases between 2015 and 2018 flagging warnings, compared with half of all cases in the past two months.
Pensions Expert understands the data includes predominantly defined benefit transfers, but a small proportion of defined contribution schemes feature too.
XPS Pensions said the increase was likely to be down to a raft of savers looking to access their pensions after lockdown, as the peak of the Covid-19 pandemic caused many to suffer financial difficulties.
The consultancy found that the factors leading to a scam warning being triggered had also changed over the years.
Whereas those targeted by cold calls fell from 22 per cent in 2016 to just 2 per cent in 2020, fee-related scam warnings saw a large increase, rising from nil in 2016 to 40 per cent in 2020.
Misunderstanding charges can be detrimental to members’ pensions, as unnecessary fees can lead to a member running out of their pension eight years earlier than they would have done under a low-cost option, XPS warned.
In addition, advice-related red flags, including on unauthorised advice, rose from 11 per cent in 2016 to 54 per cent in 2018. However, this dropped to 38 per cent in 2020.
Nicola Young, XPS Pensions member engagement hub spokesperson, said: “The worrying spike in recent months is driven by a significant increase in members that have little to no understanding of fees in the arrangement they want to use to access their pension savings.
“This may be a result of people urgently wanting to get at their savings due to current economic conditions.”
Ms Young continued: “Over the past year, we have seen more schemes provide access to independent and robust financial advice covering an additional 18,000 members. We welcome this, but more could be done if there were clear guidelines and regulatory protections for employers and trustees who seek to put in place education and access to such advice.
“We are, however, starting to see concerned trustees and employers explore and implement a signposted, safe, low-cost receiving vehicle for members that do want to transfer their pension savings. This can provide comfort to schemes and members that they are not moving to a scam or an overly costly arrangement.”
The findings were submitted to the Work and Pensions Committee’s inquiry on pension scams, which closed on Wednesday.
This story originally appeared on ftadviser.com
