Fewer retirees chose to transfer out of their defined benefit (DB) pension last month, market data by XPS Pensions Group shows.
But, despite the drop, up to 62% of the transfers made in September 2020 triggered scam red flags, one of the highest levels in over a year.
XPS monitors the DB market through its XPS Transfer Watch which records how developments affect transfer values for a typical scheme member, as well as how many members choose to transfer and how many of those are flagged up as potential scams.
The firm’s activity index fell to a record low in September with fewer DB transfers being made.
But, at the same time, its red flag index increased by 11 percentage points, meaning that 62% of the transfers detected by the system during the 30-day period showed at least one sign of a potential scam.
In August, the index flagged just over half of transfers (51%) as potential scams.
Lack of financial advice
The average transfer value also increased in September to £255,800 ($333,660, €282,476) compared with £253,200 at the end of August, which XPS believes can be attributed to a fall in gilt yields.
Mark Barlow, partner at XPS Pensions Group, said that October could see quite low market activity as well, as scheme members struggle to find financial advisers, following several firms exiting the DB transfer space.
“Many advisers withdrew from the market in part due to the ban introduced on contingent charging.”
Helen Cavanagh, consultant at XPS Pensions Group, added: “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.”
