DB transfer scam warnings reach five-month high

The number of defined benefit pension transfers with at least one warning sign of a potential scam or poor member outcomes has hit its highest level in five months. XPS Transfer Watch’s Red Flag Index rose to 61% in May. There was a small increase in the XPS Transfer Value Index. The Transfer Activity Index rebounded slightly over the month, rising to an annual rate of 63 members transferring out of every 10,000. Earlier this month the Department for Work and Pensions (DWP) closed its consultation on legislation to restrict the statutory right to a transfer value and add some safeguards to DB transfers. Legislation is expected to take effect later in the year. One in three high risk pension transfers since July 2018 would satisfy the first condition of the DWP proposed scam reduction legislation, according to data released from XPS’ Scam Protection Service earlier this week. Out of 462 transfers flagged as high risk of a scam by XPS, 37% met the first condition for no further checks under the new legislation. For the 1,143 transfers flagged as at some risk of a scam by XPS, 69% would meet the first condition. The proposed legislation would give trustees greater ability to prevent transfers where there is a risk of a pension scam. XPS Pension Group’s Transfer Watch monitors how market developments have affected transfer values for a typical pension scheme member. It also monitors how many members are choosing to take a transfer from their DB pension scheme and the incidence of scam red flags identified at the point of transfer. Helen Cavanagh, client lead, member engagement hub, XPS Pensions Group said: "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. 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."

DB transfer scam warnings reach five-month high

Related items

News from Twitter