DB pension transfer scam red flags hit 5-month high

The proportion of defined benefit (DB) pension transfers showing ‘red flags’ for potential scams rose to a five-month high of 61 per cent in May, according to XPS Pensions Group.

The XPS Transfer Watch’s Red Flag Index shows pension transfers that display at least one warning sign of a suspected scam or the potential for poor member outcomes.

XPS’ Transfer Value Index revealed a small increase as financial markets remained stable, from £247,000 in April to £251,000 in May.

Meanwhile, the Transfer Activity Index rebounded slightly during the month, rising from an annual rate of 55 members transferring out of every 10,000 in April to 63 in 10,000 in May.

The government’s consultation on legislation to restrict the statutory right to a transfer value and add safeguards closed earlier this month (June).

XPS found that one in three high-risk pension transfers since July 2018 would have fallen under the ‘first condition’ of the proposed legislation.

“It is disappointing to see another increase in the Red Flag Index, which points to a need for ongoing robust management from trustees to ensure they have protection for all transfers,” said XPS client lead, member engagement hub, Helen Cavanagh.

“The new legislation proposed by the DWP is a helpful first step and will empower trustees to stop transfers if they suspect there’s a scam. However, even with the new impending legislation, trustees need to ensure they have robust scam protection processes for all transfers.”
 

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