Activity in the defined benefit (DB) transfer market fell to a record low in September, while the number of transfers exhibiting scam ‘red flags’ increased to a new high of 62%, according pensions consultancy XPS Pensions Group.
Transfer activity in firms with schemes administered by XPS fell to a new low in September, to an annual equivalent of 0.54% of eligible members, down from 0.67% in August.
September’s stats represent 54 in every 10,000 eligible members transferring each year.
According to XPS Pensions Group partner Mark Barlow, September’s record low in transfer activity could be attributed to members finding it difficult to find a suitable financial adviser following the withdrawal of many firms from the market.
Elsewhere, according to XPS’s Transfer Value Index, transfer values increased over the month, from £253,000 at the end of August to £255,800 at the end of September. XPS said the small increase was mainly a result of a fall in gilt yields.
XPS’s index tracks the transfer value that would be provided by a hypothetical DB scheme to a member aged 64 who is entitled to a pension of £10,000 each year, starting at age 65. It increases each year in line with inflation.
While the number of DB transfers fell and transfer values increased, the number of potential scam warning flagged to the consultancy jumped by 11% in a month.
Almost two-thirds (62%) of transfers reviewed by the businesses’ scam protection service during September showed at least one warning sign of a potential scam, up from 51% in August.
XPS Pensions Group consultant Helen Cavanagh said: “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.”
XPS consults for more than 1,000 pension schemes and their sponsoring employers on an ongoing basis. The group undertakes pension administration for more than 930,000 members.