The FOI data obtained from the Money and Pensions Service (MaPS) by PensionBee, a leading online retirement savings provider, revealed the reasons behind the 51,417 Amber flags since November 2021:
46% (23,542 cases) are recorded as ‘unknown’ or ‘blank’ - categories that do not exist in legislation;
35% (18,135 cases) relate to ‘overseas investments’ - a category regulators have already acknowledged is being misapplied; and
18% (9,497 cases) relate to genuinely high-risk investments, or other flag categories specified in legislation, such as unclear fees.
The data also shows that almost 53,000 mandatory Pension Safeguarding Guidance (PSG) sessions have been carried out by the MaPS over the past four years. Despite this, they hold no data on how many of those sessions identified a genuine scam, led to a referral to Report Fraud, or resulted in a saver being advised not to proceed with their transfer.
The findings suggest that the bulk of transfers are slowed down unnecessarily - a frustrating process which can put savers off transferring their pensions - and one which could be significantly quicker with reform of the flag system, which PensionBee has called for as part of its 10-day Pension Switch Guarantee campaign.
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.
"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."
A known problem, left unresolved
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 (Conditions for Transfers) Regulations 2021. This reason alone accounts for approximately 35% of all Amber flags.
Within months of implementation, the Department for Work and Pensions (DWP) and The Pensions Regulator issued a joint statement acknowledging concerns. And the DWP's own 2023 review found the overseas flag ‘is not clearly defined’ and that savers ‘are being referred to MaPS unnecessarily.’ However the recommended consultation has not been introduced, three years later.
Some pension scheme trustees are choosing to follow the letter of the legislation rather than applying sensible risk-based judgments, pushing a huge number of consumers into a route which should be preserved for identifying and protecting against real scams. The difference in approach between schemes can lead to an inconsistent use of flags and a confusing experience for consumers.
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