Scam warnings reach five-month high
XPS Transfer Watch’s Red Flag Index rose again in May to 61%, its highest level in five months. The index reflects pension transfers with at least one warning sign of a potential scam or the potential for poor member outcomes.
There was a small increase in the Transfer Value Index, as financial markets remained stable. The Transfer Activity Index rebounded slightly over the month, rising to an annual rate of 63 members transferring out of every 10,000.
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, through its Red Flag Index, the incidence of scam red flags identified at the point of transfer.
On 9th June, 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 when the expected legislation comes into effect later in the year. However, XPS data reveals that one in three high risk pension transfers since July 2018 would have satisfied the ‘first condition’ of the Department of Work and Pensions’ proposed legislation designed to reduce scams. The data comes from XPS’ Scam Protection Service, which allows trustees to track, analyse and respond to developments in scam activity.
Helen Cavanagh, Client Lead, Member Engagement Hub, XPS Pensions Group added:
“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.”
Chart 1 – XPS Transfer Value and Transfer Activity Index
Chart 2 – XPS Red Flag Index