Pension transfer values ended 2020 at £259,000, 8% higher than the start of the year, according to XPS Pension Group after suffering periods of substantial volatility linked to the pandemic while potential scams reached record highs.
Despite ending on a high, XPS said transfer activity was down 20% compared to 2019. It said about 75 defined benefit (DB) scheme members transferred in every 1,000 that were eligible. That was down from 96 in the previous year.
XPS Transfer Watch monitors transfer values, numbers of DB scheme exits and potential scam activity in the market.
Its ‘Red Flag’ index ‘reached a record high in December with 76% of transfers showing at least one warning sign of a potential scam.
It said this represented a six-month continuous rise in the number of red flags seen and means that 49% of cases processed during 2020 showed at least one red flag, up from 34% last year.
XPS Pension Group partner Mark Barlow said: “Even though there has been significant turbulence along the way, transfer values finished 2020 higher than they started it.
“However, we have seen fewer people take the significant decision to transfer their pension during the year, perhaps put off by the current economic uncertainty.”
He added: “More concerning is the surge in pension scam red flags among those who have continued to transfer during the year.”
Consultant Helen Cavanagh explained more than three-quarters of cases raised a red flag in December which, she said was “extremely worrying”.
“This highlights that the risk of members falling victim to a pensions scam which reinforces the call from the regulator for trustees and the industry to pledge to protect their members.
“Over half of all the scam warning signs identified over the month were fee-related, including members lack of understanding of the fees involved, which could indicate members are transferring to arrangements that could be detrimental to their retirement outcomes,” said Cavanagh.