XPS Pensions Group’s Scam Flag Index has reported that pension scam warnings have hit a 12-month high. According to the company, 65% of potential pension transfers raised at least one scam warning flag in February. This figure represented a significant increase on January’s figure, which saw 50% of potential transfers raise scam warnings.
XPS also reported that:
- Pension transfer activity fell for the fourth consecutive month, down to 40 out of every 10,000 pension scheme members transferring in January.
- Pension transfer value fell for the third consecutive month. The average transfer value was sitting at £249,000 at the end of February.
Helen Cavanagh of XPS Pensions commented: “The new flags introduced last year by the Department of Work and Pension’s updated transfer regulations have driven a spike in transfer cases showing warning signs of pension scams.
“We expect this trend to continue over the coming weeks and months, which will put increased pressure on the government’s MoneyHelper service to provide guidance to all these members.”
Separate information request highlights the scale to which transfers are coming under scrutiny
Separately, a Freedom of Information (FOI) request from LCP revealed that 488 pension savers have completed “pensions safeguarding guidance” interviews since the new flags came into force in November 2021.
LCP’s FOI request revealed that pension schemes had referred 792 people to the Money and Pensions Service for safeguarding appointments as part of the system set up to reduce pension scams and pension transfer mis-selling.
In addition to the 488 savers who attended safeguarding interviews:
- 178 people were awaiting interviews
- 35 people no-showed their appointments
- Nine calls were “incomplete”
- Two contacts had not been referred by their pension provider
LCP’s Daniel Jacobson said: “At this stage we do not know whether there was an actual risk of a scam in many – or indeed any – of these cases, or whether providers are simply routinely referring a large proportion of potential transfers for guidance, rather than carrying out the expected due diligence under the new transfer regulations.
“We also do not yet have data on whether the member simply ‘ticked the box’ by taking part in an interview but then carried on with the planned transfer regardless.
“It is very important that DWP and the Money and Pensions Service undertake research into what sorts of cases are being referred, what happens during these conversations and how consumer behaviour is being altered as a result. Only then can we say for sure whether these new measures are genuinely protecting consumers.”
Industry split on whether the new system is effective
While the numbers suggest the new regulations are working, pension industry experts are divided on whether the rules are effective. Pensions Age reported in February that 47% were “waiting to see” what the reality of the changes would be.
Although there may be concerns that people are being unnecessarily referred for safeguarding appointments due to the regulations, from a regulatory perspective, it is better to loosen rules rather than having to tighten them again because scams and pension transfer mis-selling continue to occur.
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