Scammers could be behind as many as one in 10 pension transfer requests, new research from pensions consultancy Xafinity has found.
Of the “hundreds” of transfer requests Xafinity has examined on behalf of its pension scheme clients over the last year, it found signs of scam activity in 11 per cent.
Xafinity’s head of propositions Paul Darlow said the most common scam was through cold calling potential clients with offers of “free pension reviews” and “free advice”.
The second most common was advising members to transfer funds into qualified recognised overseas pension schemes (Qrops), when the member had no reason to be invested offshore.
Mr Darlow said many members did not even know they were being offered an offshore product.
There was also a problem with unregulated investments being included in wrappers recommended by regulated financial advisers.
Jackie Warwick, head of Xafinity’s pension scam identification unit, said: “Scammers are becoming much more sophisticated and spotting potential scams is becoming harder.”
She said the issue was exacerbated by unregulated “third party introducers”, who offer free pension reviews and find clients for regulated financial advisers.
“With so many parties involved, some regulated and some not, and with some advice regulated and some not, it can be very difficult for an unsuspecting individual to identify a potential scam.
“Our clients are increasingly concluding that simply asking members to tick a box asking whether they have received a cold call or been offered a free pension review is insufficient in the current environment,” she said.
Mr Darlow added of the 11 per cent of requests Xafinity flagged as potential scams, the majority of these transfers did not go ahead.
Gary Nettleingham, managing director of Catalpa Financial Planning, said he was not surprised by the 11 per cent figure.
Mr Nettleingham, who specialises in pension transfers, said: “Everyone is quite aware that there are a lot of people looking to take advantage of pension transfer rules.”
But he said he would be surprised if many of these requests are actually executed. “Obviously it would depend on the provider involved, but in my experience the major providers and receiver schemes have very robust processes.”
He said none of his clients had requested a pension transfer after receiving a cold call.
Mr Nettleingham said there was a spike in pension transfer requests when pension freedoms were brought in last year, but since then they had “levelled off”.