Pension scam warning flags reached a record high in September 2026, with 99 per cent of transfer cases reviewed raising at least one warning flag, according to XPS Group.

The findings, from XPS's latest Transfer Watch, come as the Department for Work and Pensions (DWP) consults on amendments to the pension transfer regulations, aimed at improving their effectiveness and removing unnecessary barriers to legitimate transfers.

XPS welcomed the proposed changes, suggesting that removing the overseas investment flag could significantly reduce the number of otherwise low-risk transfers that trigger scam warnings.

The consultancy estimated that, had the overseas investment flag been removed in September, more than 40 per cent fewer cases would have raised a warning flag, with a similar impact expected across the quarter.

However, XPS raised concerns about proposals to expand the First Condition to include schemes trustees consider "reputable".

It warned that this could mean more than 75 per cent of transfers are processed without assessment against the defined scam warning flags, potentially creating challenges for trustees.

The consultancy therefore called for clear guidance on how trustees should determine whether a receiving scheme is reputable, including minimum governance and review requirements.

Meanwhile, XPS's Transfer Activity Index rebounded to 0.24 per cent in September, equivalent to 24 in every 1,000 members transferring their benefits to alternative arrangements annually.

This matched the highest level recorded in 2026 to date, following lower activity during the first two months of the quarter.

However, the XPS Transfer Value Index fell by approximately 2.6 per cent over the third quarter, ending September at £135,000, as rising long-term gilt yields continued to weigh on transfer values.

XPS Group senior consultant, Helen Cavanagh, said: "Q3 2026 painted a mixed picture for pension transfers. Despite falling transfer values, activity rebounded to its highest level since early-2025, suggesting members still value the flexibility and control offered by transferring to alternative retirement arrangements.

"The introduction of a more proportionate transfer regime as proposed in the DWP consultation is welcomed, particularly where it removes unnecessary barriers to legitimate member choices.

"However, any expansion of the First Condition must be supported by clear criteria and governance expectations for trustee decision-making on what classes as a 'reputable' scheme."

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