Scammers target pension transfers
People who apply to transfer their defined-benefit pension to another pension provider need to be on their guard against a proliferation of scammers.
Almost two-thirds of cases in which members of a defined-benefit pension scheme apply to transfer their benefits to another pension provider show evidence that the member may have been a victim of a scam, a leading pension consultant has warned.
Large volumes of defined-benefit scheme members continue to apply for transfers, despite guidance from regulators that such switches rarely make good financial sense.
XPS Pension Group says 64% of the cases it monitors now carry at least one red flag. These are warning signs of a potential scam, such as the adviser working with the member not having proper regulatory clearance.
When XPS first launched its Red Flag index two years ago, fewer than a third of transfer requests raised alerts. After slipping to 25% in the autumn of 2019, the index began to climb steadily to the latest record high.
The consultant warned that the near-doubling of suspicious activity over the past two years may suggest that scammers are deliberately targeting vulnerable savers in need of access to cash amid the Covid-19 crisis.
Regulators are also warning of a broader increase in pension scams, with fraudsters capitalising on the crisis to target savers with every type of pension plan.