Around half of pension scheme members have limited understanding of their pension transfer or are unaware of who is giving them advice to transfer, according to research published today.
The Pension Scams Industry Group, the voluntary body set up to support trustees and administrators combat pension scams, has published the results of a pilot study on the scale of scam activity affecting members.
Throughout 2018 it gathered information from three providers – Phoenix Life Assurance Company, Standard Life Assurance Company and XPS Pensions Group – to understand pressures faced by transferring schemes and administrators.
The pilot showed that Sipps, including international Sipps, account for as much as 95 per cent of all transfer requests during 2018.
The study also found that only 6 per cent of transfers in the sample examined appear to have originated from a cold call.
Similarly the research flags up the top 10 concerns for these providers when doing due diligence on transfers.
The majority of red flags raised by due diligence concern the quality of adviser as 52 per cent involved an unregulated introducer, an adviser in a different country from the member, or an adviser who appears on an internal watch list because of previous concerns.
Another significant concern is member awareness. In just under half, or 49 per cent, of cases the member appeared to be unaware of who was providing the advice or the fees being charged.
Twenty per cent of red flags related to the terms of the transfer including investment returns, guarantees made or the ability to access funds.
Nineteen per cent of flags related to the receiving scheme itself being suspicious and 12 per cent of flags involved cold calling or similar.
These findings are based on sample data that consists of total transfer values at £1.33bn and the total number of individual transfers at 27,087.
The average transfer value to trust-based schemes was £225,337 and the equivalent to contract-based plans was £44,029.
PSIG chair Margaret Snowdon says: “This research highlights that some things we previously assumed are not necessarily the case. For example, the number of transfers originating from a cold call amounted to only 6 per cent, whilst the number of suspicious cases involving unregulated advisers or introducers was far higher.
“This shows that our efforts to convince individuals about the dangers of scams cannot simply focus on the cold-calling ban, as perpetrators are already using other means of contact – like email and online advertising, as well as word of mouth and factory-gating.”
PSIG says it will work with the pilot organisations and The Pensions Regulator during 2019, to agree the optimal approach to gathering key data on scams, balancing the benefits of the data against the effort and cost of its collection.
Snowdon adds: “Scams destroy lives, so we need to do what we can to limit them. The statutory right to transfer constrains trustees in this regard, as they do not have discretion to refuse a transfer. Forthcoming legislative changes to restrict the statutory right to transfer will help to reduce the opportunity for scammers but, without the power to refuse, will increase the responsibility of trustees and the risks they face.”