In research prepared for the Work and Pension Select Committee, pension scheme administrator XPS Pensions Group said the transfers ‘red flagged’ represented £25m in pension savings.
The firm, which administers over 1,000 pension schemes, said there had been a steep rise in red flag cases from just one in eight between 2015 and 2018 to around half of all cases in July and August this year.
It said the last two months cover those accessing their pension post the onset of Covid-19.
However while the number of ‘red flags’ or danger / risk signals has grown the factors triggering a red flag have changed, XPS said.
Those targeted with cold calls, for example, fell from 22% to 2% between 2016 and 2020.
However, cases of high and misunderstood fee arrangements saw the largest increase, rising to 45% over the same period.
XPS Pensions Group is responding to a call for evidence from the Work and Pension Select Committee on pension transfer scams.
Nicola Young, XPS 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.
“Over the last 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 overly costly arrangement.”
XPS has provided protection services for members leaving pension schemes since 2015. The service identifies whether any of over 40 possible red flags are present for members leaving their schemes. To date the scam protection team has been involved in 4,500 transfers representing £1 billion of pension pots.
'Red Flags' triggered on Pension Transfers
|
Period covered |
Year to 30 June 2016 |
Year to 30 June 2017 |
Year to 30 June 2018 |
Year to 30 June 2019 |
Year to 30 June 2020 |
July/Aug 2020 |
|
Cases showing at least one red flag |
13% |
5% |
16% |
35% |
33% |
51% |
|
Fee related red flags including member understanding of fees. |
0% |
0% |
0% |
26% |
40% |
45% |
|
Advice-related red flags including unauthorised advice |
11% |
37% |
54% |
32% |
38% |
40% |
|
Receiving scheme issues other than fees |
41% |
23% |
14% |
19% |
12% |
6% |
|
General lack of knowledge other than fees |
15% |
6% |
13% |
11% |
5% |
3% |
|
Cold calls |
22% |
17% |
12% |
4% |
2% |
2% |
|
Other |
11% |
17% |
7% |
8% |
3% |
4% |
Source: XPS Pensions Group