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Law360, London (September 10, 2020, 12:19 PM BST) -- Just over half the pension transfers that took place during the COVID-19 pandemic could potentially be suspicious, according to evidence submitted to a parliamentary inquiry by a consultancy.
XPS said on Wednesday that its "scam protection service" had found that 51% of pension transfers between July and August showed at least one "red flag" — an indicator that could mean customers have been duped into giving away their life savings by fraudsters.
Nearly half of all red flags were raised over savers being unaware of fee structures in their existing or new saving plans.
XPS has submitted its finding to the parliamentary Work and Pensions Committee, which is carrying out an investigation to determine the scope of pension scams. Watchdogs are concerned that fraudsters could take advantage of savers who could be suffering financial hardship during the pandemic.
"The worrying spike in recent months is driven by a significant increase in members that have little to no understanding of fees in the arrangement they want to use to access their pension savings," Nicola Young, an executive at XPS, said. "This may be a result of people urgently wanting to get at their savings due to current economic conditions."
The government introduced freedoms in 2015 that enabled savers to cash out or transfer their savings to other providers after the age of 55. But regulators are increasingly concerned that people are being duped into putting their life savings in risky or fraudulent investment schemes.
XPS found that in 2016 — a year after the freedoms were introduced — only 13% of transfers showed at least one red flag. At the time, 22% of red flags were people who had been pressured into making pension transfers after receiving unsolicited calls.
The proportion of transfers with one red flag rose to 33% in the year to the end of June 2020. But, between July and August, that figure had risen to 51%, XPS said. Just 2% of red flags were now linked to cold calls.
The People's Pension, a workplace savings provider, said on Monday that almost 1,000 customers with combined funds of £54 million ($69 million) were targeted by scams last year.
--Editing by Ed Harris.
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