Interactive Investor

Record number of final salary pension transfers at risk of fraud

24th November 2020 14:40

Marc Shoffman from interactive investor


Share on

Number of fraud red flags are at a record high, though transfer amounts are falling, XPS has found.

A record number of pension savers are at risk of scammers trying to transfer their money out of a defined benefit (DB), or final salary scheme.

Research by pension scheme adviser and administrator XPS found the number of transfers showing signs, or a ‘red flag’, of a potential scam reached a new high of 62% in September, up from 51% a month before.

The potential issues were picked up by its scam protection service, which XPS says has helped protect 4,500 members’ transfers, totalling more than £1 billion. 

It came despite XPS research of market activity in September that showed 0.54% of DB pension scheme members transferred their funds from these schemes, down from 0.67% in August.

The typical value transferred has fallen from £253,200 at the end of August to £255,800 at the end of September, which XPS attributed to a fall in gilt yields.

Helen Cavanagh, consultant at the XPS Pensions Group, says: “The red flag index hit a worrying new high of 62% during September. 

“This is a continuation of the rise seen since the start of lockdown and, within these figures, we see a significant number of members not fully understanding the fees they are paying.”

David Sinclair, director of the International Longevity Centre, says the pandemic has put extra financial pressure on those approaching retirement, which makes them targets for scammers.

He says: “Covid-19 has heavily hit a huge group of people close to retirement. It has changed people’s retirement expectations and there is a group who will have found themselves unexpectedly unemployed.

“This financial pressure may well have led to some people becoming more susceptible to scams and feeling under pressure to access cash.”

Pension cold calls are technically banned, but this does not deter many scammers using them anyway. There are fears that criminals are taking advantage of those who may need to access their retirement savings if their finances have been hit by the pandemic. 

Sinclair said:

“Cold calls about pensions are illegal but it doesn’t stop people trying. If an offer sounds too good to be true, it probably is.”

Anyone who receives an unexpected call about their pension should contact The Pensions Advisory Service to report it.

Those who think they have been a victim of a scam should get in touch with Action Fraud, part of the City of London Police.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox

Sign up for a free research account to get the latest news and discussion, and create your own virtual portfolio.

Free Sign Up