The proportion of defined benefit (DB) pension transfers displaying at least one scam 'red flag' fell by 16 percentage points to 60 per cent in January, according to the XPS Red Flag Index.

XPS Pensions Group emphasised that despite the “welcome fall” from the record high of 76 per cent seen in December, the volume of red flags seen by the scam protection service remains “significant”.

Transfer values and transfer activity remained "stable" throughout January, with the XPS Transfer Activity Index recording a slight fall from 0.69 per cent in December to 0.62 per cent in January 2021, while the average transfer value fell from £259,000 to £254,000.

Commenting on the findings, XPS pensions group consultant, Helen Cavanagh, stated: “While the incidence is down, the breakdown between causes of red flags remains similar.

“The fall may signal a return to more ‘normal’ transfers, with fewer members looking to get hold of pension savings quickly, a reason that drove some transfers at the start of the pandemic.

“We are investigating this as it could reinforce the importance of members being informed and aware of options and costs during the transfer process.”

In addition to this, XPS Pensions Group partner, Mark Barlow, emphasised that the new powers to be introduced by the Pension Schemes Act, which is expected to receive royal ascent today (11 February), “cannot come soon enough” in light of red flags remaining at “such a high level”.

“The act will allow future regulations, expected later this year, to impose conditions on a member’s statutory right to transfer,” he stated.

“Getting these conditions right will be crucial in giving trustees and employers enough power in the fight against pension scams.”

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