On the go: The number of scam warnings on defined benefit transfers is at an all-time high, despite a downward trend in transfer activity, XPS Pensions has said.
The XPS Scam Flag Index identified that in June, 97 per cent of transfer cases reviewed were assessed as having one or more scam warning signs, up from 83 per cent in May.
The rise was primarily driven by the overseas investment amber flag required by the new transfer regulations, which was raised in 85 per cent of cases assessed.
If this flag were to be removed, then the number of cases where scam warning flags were identified falls to 62 per cent.
Helen Cavanagh, member engagement hub client lead at XPS Pensions Group, said: “The full effects of the new transfer regulations are now clear. While we support the aim of the regulations to stop pension scams, the prevalence of the overseas investment flag is causing unnecessary delays for some members.
“While the government and the Pensions Regulator have recognised concerns from the industry regarding the wording of the regulations, we expect this pattern to persist unless they are revised.”
Pensions Expert reported on July 6 that attempts by the Department for Work and Pensions and TPR to clarify the intent behind rules governing pension transfers have failed to settle the matter between PensionBee and providers.
PensionBee announced on July 4 that it had reported a number of pension providers to the DWP, accusing them of exploiting loopholes in the law to unnecessarily block and obstruct transfers.
Transfer values also continued their sharp fall during June, with XPS pointing to increases in long-term gilt yields that contributed to a month-end average of £203,000, the lowest value seen since November 2014.
In May, the group’s Transfer Value Index identified that the month-end average transfer value was £217,000, the lowest since June 2016.
Following a slight increase in the number of transfer completions observed in May, the proportion of members transferring dropped to an annualised rate of 29 individuals per 100,000 in the latest XPS Transfer Activity Index, the lowest on record.
Mark Barlow, head of member options at XPS Pensions Group, said: “Recent rises in gilt yields have seen transfer values plummet for most members. This is likely to make a transfer look less attractive and, as a result, we may see transfer activity remaining subdued for some time.”
This article first appeared on FTAdviser.com
