PensionBee has raised concerns about the effectiveness of the government’s pension scam safeguards after new data suggested that only a small proportion of transfers flagged as potentially suspicious involve genuinely high-risk cases.
The provider has obtained data from the Money and Pensions Service (MaPS) through a Freedom of Information request, revealing that 51,417 Amber flags have been issued since November 2021.
According to the data, 46 per cent of Amber flags were recorded as “unknown” or “blank” reasons, while 35 per cent related to overseas investments. Just 18 per cent were linked to higher-risk investments or other concerns specifically set out in legislation, such as unclear fees.
PensionBee is now questioning whether the current flagging system is creating unnecessary delays for pension savers seeking to transfer their pensions. PensionBee says the figures suggest many savers are being directed into the safeguards process unnecessarily, particularly because overseas investments, which are common across pension schemes, account for more than a third of all Amber flags.
The data also shows that almost 53,000 mandatory Pension Safeguarding Guidance sessions have been delivered by MaPS over the past four years. However, MaPS does not hold data on how many of those sessions identified a genuine scam, resulted in a fraud referral or led to savers being advised not to proceed with a transfer.
The Department for Work and Pensions (DWP) and The Pensions Regulator previously acknowledged concerns about the overseas investments flag, while a 2023 DWP review concluded that the definition was unclear and may be leading to unnecessary referrals.
PensionBee adds that differences in how schemes apply the regulations can also create inconsistency for savers and has called for reform of the flagging system as part of its campaign for a 10-day Pension Switch Guarantee.
Lisa Picardo, Chief Business Officer UK at PensionBee, said: “These findings are difficult to defend. After more than 51,000 Amber flags have been raised, those responsible for the implementation of the scam flag system are not clear on why almost half of Amber flags were raised, nor whether any scams were prevented.
“The cost falls on the ordinary savers trying to engage with their retirement savings – people who are trying to make better decisions about their retirement and are being forced through unnecessary bureaucratic hoops. What should be a simple and straightforward switch becomes a drawn-out ordeal, and that erodes trust in financial services and puts people off engaging with their retirement altogether.
“This is not what the well-meaning legislation was designed to do. The government’s own stated intention, when it introduced these rules in 2021, was to protect savers from scams whilst allowing the majority of transfers to proceed without undue delay. Its own 2023 review confirmed that is not what is happening in practice. Until the rules are tightened, providers will still treat routine transfers as potential scams, and savers will keep paying the price.”