The XPS Pension Transfer Watch Index for September has revealed that pension transfer activity plummeted at the same time as scam alerts surged – with 62% of pension transfers highlighted as potential scams.
The company said that activity in the Defined Benefit (DB) transfer market fell to a “record low” in September, according to the XPS Transfer Watch.
The firm warned that the drop may be a sign of pension savers struggling to find a financial adviser as the ban on contingent charging on transfers loomed. The ban started on 1 October and early signs are that many advisers have pulled out of the transfer market.
Mark Barlow, partner at XPS Pensions Group, said: “It appears that the record low in transfer activity may be due to the difficulties members face in finding a suitable adviser following the withdrawal of many firms from the market. Many advisers withdrew from the market in part due to the ban introduced on contingent charging.”
The XPS Transfer Watch monitors how market developments have affected transfer values, how many members are choosing to take a transfer from their DB pension and how many scam red flags are being identified at the point of transfer.
The Transfer Activity Index dropped to a record low in September, marginally lower than the level seen in April, just after the Coronavirus lockdown.
Transfer Activity in September was an annual equivalent of 0.54% of eligible members, down from 0.67% in August. This represents 54 in every 10,000 eligible members transferring each year.
At the same time, the XPS Pensions Group’s Red Flag Index – which warns about potential scams on transfers – rose by 11%, with 62% of transfers ‘red flagged’ by the XPS scam protection service during September. These transfers showed at least one warning sign of a potential scam. This was up from 51% in August and represents almost two in every three members covered by the service.
Helen Cavanagh, consultant, XPS Pensions Group, said: “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.”
The XPS Pensions Group’s Transfer Value Index increased over the month, from £253,200 at the end of August to £255,800 at the end of September. This modest increase was a mainly result of a fall in gilt yields.
XPS Transfer Value and Transfer Activity Index
XPS Red Flag Index