Pension transfer activity has fallen to its lowest level in over five years, according to XPS Pensions Group.
During July 2023, only 19 members per 100,000 transferred their current scheme to an alternative arrangement, the lowest since the transfer activity index was first published in May 2018.
The Transfer Value Index remained stable with July becoming the third consecutive month with little fluctuation in the index. This was due to fewer changes in gilt yields and long-term inflation expectations.
Some 93% of cases reviewed by the XPS Scam Protection Service in July raised at least one scam warning flag, according to XPS’s Scam Flag Index.
Helen Cavanagh, client lead at XPS Pensions Group’s Member Engagement Hub, said: “Transfer activity levels have declined dramatically over the past five years, and this trend may have been further compounded by more recent falling transfer values. However, we are still seeing that most transfers are made as members approach their retirement and it is clear that transfers remain an important part of the retirement decision making process for many.”
FCA guidance
In other news, the Financial Conduct Authority (FCA) has updated its guidance on how to support vulnerable consumers when providing pension transfer advice.
Consumers with defined benefit schemes may be in the following circumstances:
- they may be worried about the financial situation of their DB scheme’s sponsoring employer;
- they may be concerned about the solvency of their DB pension scheme;
- they may have heard their DB scheme is at risk of going to the Pension Protection Fund (PPF); or
- they may be in serious financial difficulty due to the cost of living.
Consumers in these situations may also be susceptible to scams or fraud. The following are warning signs that consumers may be more vulnerable to scams or fraud activity:
- they may appear overconfident in their decision making despite low knowledge of pensions or investments;
- they may be experiencing distraction from personal life events;
- they may be experiencing financial dissatisfaction;
- they may be in cognitive decline or socially isolated or lonely; and
- they may appear in a hurry or agitated about arranging the pension transfer.
The regulator has also said that firms should assess their approach to vulnerability for pension transfer customers and ensure that they are meeting the requirements and take the following steps:
- Identify when customers with DB pensions are likely to approach them for advice and design and deliver support to meet their needs. In a two-adviser model firms should properly consider the customer’s particular circumstances and whether there are any indications the customer has been coached or influenced to transfer. In some cases it may be appropriate to have joint meetings with customers to manage the risks of communications being misinterpreted by either of the firms, or by the customer;
- Encourage customers requesting a pension transfer or advice to disclose information where they see clear indicators of vulnerability;
- Tailor communications to retail customers, considering the characteristics of retail customers, including those of vulnerability;
- Where firms interact with customers based overseas, they should also consider whether their customers are susceptible to scams or fraud and look for the warning signs above. Firms providing overseas pension transfer advice should ensure that their service does not adversely affect groups of customers in the target market, including those with characteristics of vulnerability.
