Pension scam red flags 'soar' to near-record high; transfer activity remains low

The proportion of pension transfers that showed signs of a potential scam “soared” to a near-record high of 70 per cent in March, representing the third consecutive monthly increase in scam warning flags, according to XPS Pensions Group’s Scam Flag Index.

This also marks the highest proportion in the past 12 months, up from 65 per cent in February, and is the highest rate of scam flags since December 2020, when over three-quarters (76 per cent) of requested transfers showed signs of a scam.

Reflecting on the figures, XPS Pensions Group client lead, member engagement hub, Helen Cavanagh, suggested that the updated transfer regulations are having a "significant impact on the volume of scam warning flags that are being observed".

“Whilst 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 be pressure on the service to provide guidance to all these members in a timely manner," she explained.

In contrast to the increase in potential scams, the XPS Transfer Activity Index found that transfer activity had reached a record low for the fifth month in a row, with an annualised rate of 38 members out of every 10,000 transferring their pensions.

Falls were also seen in the Transfer Value Index, for the fourth consecutive month, as whilst inflation expectations increased, continued rises in gilt yields saw the month-end average decrease to £245,000.

This represents a 2 per cent fall compared to February's average of £249,000, and a 9 per cent reduction from the peak of £270,000 recorded in November 2021.

"Members tend to be more cautious in times of economic uncertainty, so it is not surprising that transfer activity continues to fall," XPS Pensions Group head of member options," XPS Pensions Group head of member options, Mark Barlow, explained.

However, Barlow also raised concerns that whilst 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.

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