On the go: One in three high-risk defined benefit transfers would not be flagged under new scam rules proposed by the government, according to research from XPS Pensions Group.
The Department for Work and Pensions published a consultation in May giving scheme trustees and managers new powers that, the government said, will provide additional protection for members against scams.
Under the new rules, the first condition requires trustees to check if the transfer is to a public sector pension scheme, an authorised master trust, an authorised collective money purchase scheme, or a personal pension through an insurer.
However, data from XPS showed that one in three transfers identified as showing ‘red flags’ for a scam since July 2018 would have been allowed under the DWP’s proposed regime.
While only 37 per cent of the 462 high-risk transfers would be flagged under the first condition, the number increases to 69 per cent in the 1,143 cases with some risk of being a scam.
From the 2,184 transfers that have not raised red flags under XPS’s scams protection service, only 64 per cent meet the rules’ first condition.
XPS noted that the DWP’s proposals will give trustees greater ability to prevent transfers in certain circumstances.
However, to reduce the possibility of a scam, trustees must continue to carry out robust scam protection measures, such as those recommended by the Pension Scams Industry Group’s code on combating pension scams, the consultancy stated.
Mark Barlow, partner at XPS Pensions Group, said: “The ability for trustees to block transfers in certain circumstances is a welcome step forward in the fight against pension scams.
“However, we are concerned that these conditions could suggest that certain transfers are ‘scam-free’, when we know this not to be the case.
“Evidence from our scam protection service demonstrates how robust scam protection measures will continue to be vital in protecting member outcomes.”
