Pension Scams – risks rising if more people at home and markets so weak
- Pension scam risks increase with people at home and markets in meltdown.
- More people likely to be caught by cold-calling or online scammers.
- Urgent Regulatory action and early warning systems required to improve consumer protection.
- Parliamentarians support new All-Party Parliamentary Group on Pension Scams.
More people at home gives more easy targets for fraudsters: As more people are forced to stay at home during the current coronavirus crisis and investment markets have plunged, the risks of cold-calling criminals or on-line fraudsters reaching more savers and luring them into scam investments have grown. Government and Regulators have been trying to deal with this problem for years, but it continues to worsen.
Average pension scam loss was over £80,000 and this is loss to all taxpayers: Many thousands of pension savers have been duped into transferring their hard-earned pension savings into what turned out to be bogus arrangements; up to £10billion may have been lost to these scammers and 2018 estimates suggest the average person lost £82,000. This is a complex and growing problem and this is a loss to all taxpayers, not just the individuals. Much of the pension fund may have originally come from tax relief and those who lose out are more likely to have to claim benefits in future.
What has Government been doing?: Many different initiatives have been tried. For example, ‘Project Bloom’ was started in 2012, as a multi-agency taskforce which includes Regulators, the Police and Government Departments. In 2014, the FCA introduced its ‘ScamSmart’ campaign to warn about investment scams. After this, a Project Scorpion initiative saw City of London Police and DWP working together to try to alert more people about scams. The Pensions Scams Industry Group introduced a code of good practice for trustees and administrators to use before agreeing to transfer people’s pension savings, but this is not compulsory. Although some scams have been prevented by this code, not all providers are using it. In 2018, the FCA and the Pensions Regulator launched a special ScamSmart campaign for Pension Fraud. Legislation was introduced that was supposed to ban cold-calling and there is a new Bill going through Parliament which aims to tighten the rules for providers to make more checks before transferring pensions.
None of these seem to have been up to the task of protecting consumers: The problem has grown significantly and even the ban on cold-calling is not a total ban, since the new laws allow someone to call you if you have a pension with their firm. Therefore, scammers might call and pretend to represent a major pension providers and, if the person happens to have a pension with that company, they will not realise this is a fraud.
Official channels supposedly to help consumers identify or report frauds are too confusing: If a consumer wishes to try to avoid a fraud, or realises that they are the victim of fraud, they will be very confused as to what to do. The official channels are dispersed across so many different agencies. Before consumers transfer their pension, official advice is to check three sources for further information.
- Firstly, consumers are told to consult the FCA Register or call the FCA, to check whether a firm or an adviser are authorised by the FCA (which is a pre-requisite for being entitled to compensation if anything goes wrong). But this Register is not being updated during 2020, so the information will certainly not be reliable.
- Secondly, they are told to check the ScamSmart Warning List, but this too is usually out of date.
- Thirdly it is suggested that they should check whether the scheme they are transferring to has HMRC registration. Most people would have no idea how to do all this.
Trustees, employers, advisers and administrators are told to use the ‘tPR checklist’ on The Pensions Regulator website but this will not contain the latest alerts of fraudulent schemes. There is also the Pensions Advisory Service, which could be helpful if someone were to make an appointment with PensionWise, but usually they will be in a rush as the scammers say the investment opportunity will not last long. Finally, if you realise you have been the victim of a scam, you are told to call Action Fraud (on 0300 123 2040) but this is just a call centre to record people’s calls, rather than to take action. Recent media reports suggest ActionFraud does not even pass on all the information from the calls it receives.
Too much official action is focused on reacting afterwards, rather than prevention: The Regulatory system has focused mostly on trying to catch the criminals after fraud has already occurred – but this takes such a long time that many more people have usually lost out by the time any action is taken. There seems to have been inadequate early warning, or co-ordination and insufficient information to alert consumers to the risks of scams. There have been intermittent advertising campaigns but many people have lost out during the time between first report of a scam and the actual proof and prosecution (if any) of perpetrators. It is vital that we improve early warning systems and liaison between advisers, providers and regulators, so that more scams can be prevented.
New APPG on Pension Scams: A new All Party Parliamentary Group, supported by the Transparency Task Force, is being established to work together across political party lines, to find ways of protecting and warning the public about the ongoing risks they face. Most MPs have constituents affected by this, but many constituents are too ashamed to tell others, some have lost huge amounts of their retirement resources – and of course the taxpayer will have lost all the tax relief granted to these pension funds too. The APPG will aim to be a forum through which Parliamentarians and other stakeholders can work together to better protect the public from the perils of pension scams and secondary scammers and facilitate the development of preventative and supportive policy initiatives.
APPG may suggest amendments to the new Pensions Schemes Bill: It is hoped that the new APPG on Pension Scams may be able to work on suggesting amendment to the Pension Schemes Bill, or associated regulations, which will protect consumers better against the scams. Requiring pension schemes to check the origin of any request to transfer money out (was it from a cold call?), checking whether the customer has spoken to PensionWise, checking what information they have about the scheme they are moving to and warning clearly about the risks of scams, could all be a mandatory part of the pension transfer process. Consideration can also be given to making the industry Code of Good Practice compulsory.
Andy Agathangelou, Founder of the Transparency Task Force, a pro-consumer campaign organisation commented:
“It is clear that there is a need for more and better thinking around what should be done to mitigate the risk of the UK’s pension-saving public falling prey to sophisticated scammers; and also to help those that have been scammed. We are doing all we can to support this initiative including acting as the Secretariat for the new APPG. I hope every Parliamentarian who cares will get in touch and get involved.”