Did you know that 44% of all pension transfers have an amber flag raised for ‘unknown’ reasons? This statistic paints a worrying picture for retirees who are looking to transfer their pensions. With so many uncertainties surrounding these transfers, it’s important to be aware of the risks involved before making any decisions.

A large number of Money and Pensions Service (MaPS) amber flags scam guidance sessions are being conducted without knowing the reason for the flag being raised. Almost half of the time, the MaPS service does not know why the member attended the session. ‘Unknown’ was given as the reason for 44% of recorded cases over the past three months (April-June 2022).

To round out the list, overseas investments continue to raise amber flags, causing many potentially low-risk pension transfers to be put on hold as a result. In light of the very broad definition of overseas investments in the rules, some pension schemes are raising amber flags on mainstream investments, such as funds from major asset managers that invest globally to create a significant skew in relation to the numbers, so the real figure could be higher still.

The data collection process can be improved with a more proactive approach by Money and Pensions Service. The information that they are collecting on an individual level is vast but it seems like they are not proactively improving the information.

Guidance

The new rules introduced on November 2021 require trustees of a transferring pension to raise an amber flag, which pauses the transfer if they find that there are overseas investments included in their receiving scheme or other relevant issues. Before the transfer can be authorised, a member involved must prove they’ve received scam guidance from MaPS following any filings being flagged.

Since the introduction of the new transfer rules, a total of 3,731 members have received scam guidance from the MaPS as a result of an amber flag being raised by a trustee. Month on month, the number of amber flags raised has increased significantly, leaping from just 20 guidance sessions in December 2021 to 1,067 in June 2022. However, the rate of month-on-month growth appears to be slowing and was nearly level between May and June 2022.

Table 2: MaPS data on the number of scam guidance sessions

Month Scam guidance sessions  % change from the previous month

Concerns

One of the most concerning aspects of this issue is how many people were targeted by scammers who should have been able to identify a red flag and reach out before it was too late.

While it is positive to see such an increase in the number of people receiving scam guidance when it comes to their pension transfers, there remains a clear issue with respect as they are only given very little information and oftentimes not enough reason for concern.

It is concerning that there has been no information provided by MaPS about the reason for raising their amber flag. This makes it difficult, if not impossible at this point in time to accurately assess where scams are focusing and how effective our regulation really was. The trustees should be able to better understand why members attend scam sessions by looking at the data. They need this information in order to take action and resolve any issues.

At SJB, we want our clients to have the best chance of a comfortable retirement. That’s why we offer retirement planning advice that takes into account all the latest changes in legislation and allows you to make an informed decision about your future. Our team is experienced in helping people navigate these waters and will work with you every step of the way to ensure your pension is transferred safely and securely.