DB transfers fall to record low but scam concerns rise

DB pension transfers fell to a record low for the second consecutive month in January, falling by a further 6 per cent, according to XPS Pension Group’s Transfer Activity Index.

The index revealed an annualised rate of 47 members out of every 10,000 transferring their pensions in January, the lowest rate since the index launched in 2018 and a fall from the previous record low of 50 members out of every 10,000 recorded in December 2021.

However, the XPS Pension Scam Flag Index, which shows red flags for a potential scam or for poor member outcomes, rose to 50 per cent, having stayed below this in the previous four months. The scam index in December 2021 had 41 per cent of transfers showing at least one warning sign of a potential scam.

According to XPS, the fall in transfers is likely to have been driven in part by difficulties that members continue to face in accessing quality financial advice.

It also revealed that the most prevalent warning flag identified was a lack of member understanding regarding fees to be paid to the receiving scheme.

XPS Pensions group member engagement hub client lead, Helen Cavanagh, commented: “January’s data shows an unwelcome increase in warning flags on transfers.

“A lack of member understanding of fees remains the most common flag, which will require members to take scams guidance before transferring under the new transfer regulations.”

XPS Pensions group head of member options, Mark Barlow, added: “Transfer activity remains at historically low levels, a sign that members continue to struggle to find suitable financial advice.

“It’s imperative that schemes do all they can to help members access quality advice before they make any decisions about what to do with pension pots.”

XPS also reported that its Transfer Value Index fell in January by 2 per cent, to a month-end average of £253,000.

This fall was largely due to a continued increase in gilt yields over the course of January, XPS stated, and came despite the rises in inflation expectations.

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