Pension transfers blocked to fight scams

Savers have been stripped of the right to have the final say on pension transfers, to combat the rising tide of scams.

Pension companies will be able to block customers from moving their money if they suspect they are handing over savings to criminals.

This comes amid a growing fraud epidemic. Almost eight million Britons have been targeted by scammers, a survey by insurer LV previously found. The number of transfers showing signs of potential fraud has risen 80pc in the past five years, according to XPS Pensions, a consultancy.

From Nov 30, providers will be able to deny a transfer where “red flags” point to a suspected scam, in a move that will restrict savers’ statutory right to switch their pension from one company to another.

The clampdown has been widely supported by the pensions industry. Pension schemes and their trustees will be expected to run an extra four- step check before processing transfers, though it is not mandatory.

Companies will be able to “red flag” transfers, which completely blocks them, or issue an “amber flag”, which pauses a transfer until the saver can prove they have taken guidance from the Money and Pensions Service, a free government resource.

Since 2015, savers have had more flexibility to invest their pensions thanks to the “pension freedom” reforms. But fraudsters have taken advantage by convincing savers to transfer their cash into bogus investments.

More than one in 10 transfers would have been blocked over the past year if these new regulations had been in force, XPS data found. The Pension Scams Industry Group, an action group, has estimated that only 5pc of transfers are a cause for concern.