Over 50 per cent of pension transfers carried out since the Covid crisis have triggered a scam warning.
This data was compiled for the Work and Pension Select Committe by XPS Pensions Group. This administration group has provided protection services for members leaving pension schemes since 2015, allowing it to track, analyse and respond to developments in scam activity.
XPS says there has been a steep rise in suspected fraudulent activity since the start of the pandemic. Between 2015 and 2018 around just one in eight transfer cases were flagged as being at risk of a scam. This rose to more than half of all cases during July and August this year, this covers those accessing pension pots after the onset of Covid-19.
Factors triggering a red flag have changed. Those targeted with cold calls fell from 22 per cent to 2 per cent between 2016 and 2020.
However, cases of high and misunderstood fee arrangements saw the largest increase, rising to 45 per cent over the same period. Unnecessary fees can have a substantial impact on pension income and can lead to a member running out of their pension eight years earlier than they would have done under a low-cost option.
XPS Member Engagement Hub spokesperson Nicola Young says: “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.”
She adds: “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 an overly costly arrangement.”
XPS member protection 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. The team also provide support to trustees and administrators to investigate any red flags identified.
The firm has submitted their findings in response to a call for evidence from the Work and Pension Select Committee.