The XPS Red Flag Index hit a record high in December 2020, with 76 per cent of defined benefit (DB) transfers showing at least one warning sign of a potential scam, representing a six-month continuous rise in the number of red flags.
DB transfer activity fell 20 per cent in 2020, whilst pension scam red flags increased, with 49 per cent of cases processed during 2020 showing at least one red flag, compared to 34 per cent in 2019.
XPS Pensions Group consultant, Helen Cavanagh, highlighted the findings as "extremely worrying".
She said: “This highlights that the risk of members falling victim to a pensions scam which reinforces the call from the regulator for trustees and the industry to pledge to protect their members.
“Over half of all the scam warning signs identified over the month were fee related, including members lack of understanding of the fees involved, which could indicate members are transferring to arrangements that could be detrimental to their retirement outcomes.”
In addition to this, XPS’s Transfer Watch recorded “substantial volatility” in transfer values throughout 2020, and particularly at the onset of the pandemic, before finishing the year at £259,000, 8 per cent higher than the year start.
Commenting on the findings, XPS Pensions Group partner, Mark Barlow, added: “Even though there has been significant turbulence along the way, transfer values finished 2020 higher than they started it.
“However, we have seen fewer people take the significant decision to transfer their pension during the year, perhaps put off by the current economic uncertainty. More concerning is the surge in pension scam red flags amongst those who have continued to transfer during the year.”
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