Nearly half (44 per cent) of scam guidance sessions due to an ‘amber flag’ warning being raised during a pension transfer were conducted without knowledge of the reason for the flag being raised, Quilter has found.

According to a freedom of information (FOI) response the firm received from the Money and Pensions Service (Maps), across the 2,875 sessions conducted in April-June 2022, Maps did not know the reason for the session in 1,266 of them.

New transfer rules were introduced in November 2021, whereby trustees would have to raise amber or red flag warnings if they felt a pension transfer could be at risk of scam activity, with a guidance session mandatory before a transfer can be authorised when an amber flag is raised.

The FOI data also showed that overseas investments remained a common cause of an amber flag being raised, which Quilter said was resulting in many potentially low-risk pension transfers being put on hold for this reason.

“Due to the very broad way in which the rules are worded, some pension schemes are raising amber flags on overseas investments covering mainstream investments, such as funds from major asset managers that are investing globally,” Quilter stated.

Furthermore, Maps warned that the high proportion of ‘unknown’ reasons for guidance sessions was likely to create a significant skew in the numbers, so the real figure could be higher.

Quilter added that, “worryingly”, Maps does not seem to be proactively improving the data they are collecting, as in the same FOI response they confirmed that they do not enter correspondence with members, schemes or providers about the reason for amber flags.

The FOI response also revealed that 3,731 scam guidance sessions have taken place since the new transfer rules were introduced due to an amber flag being raised by a trustee, as at June 2022.

While just 20 sessions were conducted in December 2021, this increased to 109 in January, 222 in February, 505 in March, 715 in April, and 1,093 in May, before falling slightly to 1,067 in June.

“In the 12 months to 31 November 2021, the Money and Pensions Service took just 482 calls and webchats in relation to pensions scams,” commented Quilter head of retirement policy, Jon Greer.

“Comparatively, in the seven months that followed the introduction of the new pension rules, this number soared to 3,731. This highlights the real disconnect between the number of people whose pension transfers were potentially being targeted by a scam, versus the number of people who were able to identify this and reach out for help prior to the rule change.

“However, while it is positive to see such a noted increase in the number of people receiving scam guidance when it comes to their pension transfers - particularly where there is a genuine cause for concern - there remains a clear issue with transfers being halted where the trustees are finding an amber flag, but Maps is not being made aware of the reason.

“The lack of information provided to Maps in terms of the reason for the amber flag being raised is concerning. If the information is not logged, and particularly whether there was an actual risk of a scam, it will be difficult to assess where scams are focusing and may provide an inaccurate picture of the effectiveness of the regulation.

“What’s clear is that we need an improvement on the data collected to see the reasons for the member attending the scam session – no doubt this will help the session with the member, and secondly, we need to resolve the impasse that Trustees face in applying the letter of the law which is out of step with the policy intention.”

Pensions Age has approached Maps for comment.

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