More than half of pension transfers carried out post-lockdown have flagged scam warnings, research has shown.
According to XPS Pensions there has been a significant increase in the number of scam warnings on transfers with only one in eight cases between 2015 and 2018 flagging warnings, compared with half of all cases in the past two months.
FTAdviser understands the data includes predominantly defined benefit transfers but a small proportion of defined contribution schemes feature too.
XPS Pensions said the increase was likely to be down to a raft of savers looking to access their pensions after lockdown as the peak of the Covid-19 pandemic caused many to suffer financial difficulties.
The pensions consultancy found the factors leading to a scam warning being triggered had also changed over the years.
Whereas those targeted by cold calls fell from 22 per cent in 2016 to only 2 per cent in 2020 fee-related scam warnings saw a large increase, rising from nil in 2016 to 40 per cent in 2020.
Misunderstanding fees can be detrimental to members’ pensions as unnecessary fees can lead to a member running out of their pension eight years earlier than they would have done under a low-cost option, XPS warned.
In addition, advice-related red flags, including on unauthorised advice, rose from 11 per cent in 2016 to 54 per cent in 2018.
However, this dropped to 38 per cent in 2020.
Nicola Young, XPS member engagement hub spokesperson, said: “The worrying spike in recent months is driven by a significant increase in members that have little to no understanding of fees in the arrangement they want to use to access their pension savings.
“This may be a result of people urgently wanting to get at their savings due to current economic conditions."
She added: “Over the last year we have seen more schemes provide access to independent and robust financial advice covering an additional 18,000 members. We welcome this, but more could be done if there were clear guidelines and regulatory protections for employers and trustees who seek to put in place education and access to such advice.
“We are, however, starting to see concerned trustees and employers explore and implement a signposted, safe, low cost receiving vehicle for members that do want to transfer their pension savings. This can provide comfort to schemes and members that they are not moving to a scam or overly costly arrangement.”
The findings were submitted to the Work and Pensions committee inquiry on pension scams which closes for responses today.
This will form part of broader work looking into the impact of the pension freedoms.
Renny Biggins, head of retirement at The Investing and Saving Alliance (Tisa), said the government and industry must join forces in order to tackle the growing scams issue.
He said: “To help reduce criminal activity, it is important to reduce individuals’ exposure to scams, continue promoting awareness of scams through various channels as well as tighten the relevant legislation.