While over 51K potential pension transfer scam amber flags were raised, only a minority were flagged as genuinely high-risk, according to a Freedom of Information request made by PensionBee.
The data, obtained from the Money and Pensions Service (MaPS), revealed the reasons behind the 51,417 amber flags raised since November 2021.
It showed just 18% of cases (9,497) relate to genuinely high-risk investments or other flag categories such as high fees.
The vast majority (46%) of cases are recorded as ‘unknown’ or ‘blank’; categories that do not exist in legislation, while 35% relate to ‘overseas investments’, the data revealed.
Lisa Picardo, chief business officer UK at PensionBee, said: “These findings are difficult to defend. After more than 51,000 amber flags have been raised, those responsible for the implementation of the scam flag system are not clear on why almost half of amber flags were raised, nor whether any scams were prevented.
“The cost falls on the ordinary savers trying to engage with their retirement savings – people who are trying to make better decisions about their retirement and are being forced through unnecessary bureaucratic hoops. What should be a simple and straightforward switch becomes a drawn-out ordeal, and that erodes trust in financial services and puts people off engaging with their retirement altogether.”
PensionBee said the presence of ‘overseas investments’ – a standard feature of almost all pension schemes – is listed as a reason for triggering an amber flag in the Occupational and Personal Pension Schemes Regulations 2021. This is despite the Department for Work and Pensions and The Pensions Regulator acknowledging concerns, with the DWP’s own 2023 review finding the overseas flag is ‘not clearly defined’ and that savers are being referred to MaPS (Money and Pensions Service) unnecessarily.
Picardo added: “This is not what the well-meaning legislation was designed to do. The Government’s own stated intention, when it introduced these rules in 2021, was to protect savers from scams whilst allowing the majority of transfers to proceed without undue delay.
“Its own 2023 review confirmed that is not what is happening in practice. Until the rules are tightened, providers will still treat routine transfers as potential scams, and savers will keep paying the price.”
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