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August sees reduction in scam flags raised by DB pension transfers

August sees reduction in scam flags raised by DB pension transfers

28 Sep 2023

There was a 7% reduction in the rate of pension transfer requests that raised a red flag for a potential scam in the month of August, an XPS Pensions Group analysis has found.

XPS’s Scam Flag Index revealed that 86% of cases raised at least one scam warning, the first time the index has fallen below 90% since May 2022. In part, this was due to a larger proportion of transfers being to purchase an immediate annuity. Rising interest rates have made annuity pricing more favourable to members over the past year.

Transfers into annuities are at lower risk of generating scam warning flags than transfers into other receiving vehicles. This is because the member is not required to make any investment decisions, reducing the opportunities for a scammer to influence the member and their decision making.

XPS Pension Group’s Transfer Value Index continues to remain fairly stable, finishing the month at £159,000. This can be attributed to reduced volatility in gilt yields and long-term inflation expectations over the past few months, compared to more significant movements seen over 2022 and the start of 2023.

XPS Pension Group’s Transfer Activity Index recovered from its previous low during August, with an annualised rate of 28 members per 100,000 transferring out of their current scheme to an alternative arrangement. This increased from 19 members per 1000 since July 2023.

Chart 1 - XPS Transfer Value Index

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Chart 2 - XPS Transfer Activity Index

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Chart 3 – XPS Scam Flag Index

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Table 1 – Transfer Watch over the past 12 months

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   Source: XPS Pensions Group – All data is at the end of each month.

Notes:

XPS Transfer Watch is part of XPSArena, a free to access destination for learning support and development for people in pensions.  Users will be able to scrutinise the latest data contributing to the headline Scam Flag Index, with filters available to compare warning flag prevalence over time and by several demographic groupings.

XPS Transfer Watch monitors how market developments have affected transfer values for an example member, as well as how many members are choosing to take a transfer value.

XPS Pensions Group’s Transfer Value Index shows the estimated Cash Transfer Value of a 64-year-old member with a pension of £10,000 a year with typical inflation increases. The value changes over time with market movements. Mortality assumptions are reviewed periodically.

XPS Pensions Group’s Transfer Activity Index represent the annualised proportion of members that transfer out of pension schemes administered by XPS. If replicated across all private sector, funded, UK, DB schemes this indicates that approximately 20,000 DB members leave their schemes each year,

XPS Pensions Group’s Scam Flag Index tracks the percentage of monthly transfers reviewed by the businesses’ scam protection service that are identified as having warning ‘flags’ which indicate that the member is at risk of being scammed. The flags monitored include both the DWP’s set list of amber and red warnings and further areas of concern identified and monitored by XPS’ Scam Protection Service. The service is provided to the Trustees of approximately 350 occupational pension schemes. ‚Äč

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