- Major pension provider joins Police Foundation to call on Government and Regulators to urgently improve consumer protections against pension scams.
- Over £600billion of taxpayer money may be at risk of being lost.
- Latest research from The Police Foundation and The People’s Pension concludes greater powers are needed to help prevent transfers to suspected scam schemes.
- Report highlights need for centralised information-sharing and co-ordination between providers, regulators, police and agencies.
- Pension providers are on the front-line to protect against scams – if they didn’t transfer the money, customers would not lose out.
- Current legal and regulatory approach prioritises speed of transfer over pension protection which means greater risks to both consumers and taxpayers.
- Government needs to increase its efforts to tackle scams, punish perpetrators and protect that hundreds of billions of pounds of taxpayer money invested in pensions.
Government and Regulators have failed to ensure adequate protection against pension scams: The People’s Pension and The Police Foundation research, released today is another wake-up call for Government and Regulators to urgently improve protection against pension scams. Their Report shows pension providers are unable to protect customers properly, even if they suspect they are at risk of transferring to a scam scheme.
Taxpayers have put at least £600billion into pensions at risk of scams – this money must be better protected: The research suggest around £2.5trillion of pension assets are at risk of being lost to scammers, and I estimate that at least one quarter of all pension funds originated from tax relief – for the largest funds it could be even more. Therefore, when a pension scam occurs, it is not only the pension saver that loses out. All taxpayers lose as well. This fact is too often overlooked. The Government needs to increase its efforts to tackle scams, punish perpetrators and protect that hundreds of billions of pounds of taxpayer money invested in pensions, because the purpose of the tax relief paid into people’s pensions was to ensure future taxpayers do not have to spend so much on alleviating pensioner poverty.
Problems are endemic to the system and scammers have increased sophistication while authorities lag behind: The Report highlights the problems that are endemic to our pension system, which leave consumers particularly vulnerable to increasingly sophisticated fraudsters. It takes too long to confirm a fraud, by which time the money cannot be recovered and is lost to the pension system, leaving those who saved for retirement at risk of later life poverty instead. Success in catching those responsible is negligible and does not do enough to deter fraudsters.
Consumers don’t realise the risks as pension understanding and education are too low: The complexity of UK pensions has always rendered it difficult for consumers to take responsibility for their pension investments and scammers prey on this lack of understanding.
Take up of PensionWise is too low to ensure adequate protection: When the Pension Freedoms were announced, the intention was that everyone would have free impartial guidance to help them make good decisions about their pension savings. Unfortunately, take-up of PensionWise guidance is far too low and this leaves consumers more vulnerable. Major explain inadequacy of current consumer protections against pension scams.
FCA must urgently introduce Regulations to give more people PensionWise guidance: I have written to the FCA to ask them to urgently introduce the Regulations which we legislated for in 2017 Financial Guidance and Claims Act, that would require pension providers to help ensure all customers take advantage of PensionWise guidance before transferring.
Pension providers are on the front-line to protect against scams – if they didn’t transfer the money, customers would not lose out but they can’t legally hold up the transfer: Unless Pension providers are able to help prevent more scams, the dangers will continue to grow. But they do not have sufficient power to do so. Currently, providers are required to transfer funds speedily, even if they suspect a scam and it takes so long to detect and confirm scams that many people have already lost out before anything is ever done. There is a voluntary due diligence system which many use to try to spot scams, but they are powerless to protect their customers adequately.
Current legal and regulatory approach prioritises speed of transfer over pension protection which means greater risks to both consumers and taxpayers: The Police Foundation and The People’s Pension are calling for greater powers to be given to pension firms, so they can delay customer requests if they suspect a scam, especially as fraudsters often prime customers to insist on transferring, which is their statutory right.
Need for centralised information-sharing and co-ordination between providers, regulators, police and agencies: The Report calls for a centralised hub that can be used by all pension companies to search for suspected scam or fraud. It is astonishing that, so far, there is no centralised database to help providers check whether others have already spotted the same potential scams and improve the likelihood of being able to protect consumers before transfers proceed. once the money has gone, it is almost never recovered. Even worse, some customers will find that not only have they lost their pension, they are also liable for large tax payments because they have supposedly withdrawn their funds before they disappeared.
Too many agencies work on pension fraud, but they are not working effectively together: The research expresses frustration with the current situation, because the issue of pension fraud strays over many different agencies. Police focus on pension liberation, however such fraud is a tiny part of the problem but other scams do not count as police matters. All such scams should be considered as theft and part of the criminal process. In addition, providers should be obliged to share information or do not report suspected frauds in many cases, consumers are not clear who to report scams to or fail to report them at all, and often they do not discover they have lost their money until long after the transfer takes place. Regulators have relied on ‘information campaigns’, education or advisers to protect consumers, but this has not worked. Even the ban on cold-calling is incomplete and the lack of intelligence sharing about scams or the voluntary nature of due diligence checks, leaves customers unprotected. There is the commendable ScamSmart campaign and ‘Action Fraud’ exists to collect information on scams, however there is precious little clarity for both customers and providers regarding who is responsible for dealing with consumer protection.