It has been estimated that in the region of £1bn of pension savings has been lost to scams (and $42m of this has gone missing since the pension freedom and choice regime was announced as part of the 2014 budget). Indeed, the actual figure could be significantly higher. Some of the stories regarding duped pensioners are heartbreaking and scheme administrators are often left in the difficult position of balancing:
- the risk of getting in the way of members’ free choice; and
- the risk of facilitating a transfer which results in potentially devastating losses to the member.
There is no doubt that well-trained administrators can make a huge difference (and, in fact, are doing so) to the number of scam-transfers which proceed. However, despite administrators being trained to provide appropriate information and to ask relevant questions of members, there will always be a body of members who insist on transferring their benefits against the better judgment of the administrator involved.
Whilst many of the scammers’ schemes are not illegal they often have disastrous consequences by promising members benefits which will incur significant unauthorised payment charges, be this because they promise them more than 25% of their pot as a tax-free lump sum, or their promise access to benefits before age 55.The requirements which now apply in relation to members seeking to transfer funds worth £30,000 or more have gone some way to reduce the amount of scans which get over the line, but scammers can be clever, and there are still many unscrupulous people and organisations which seek (and often succeed) in duping pension scheme members. Indeed Michelle Cracknell of The Pensions Advisory Service has been quoted as saying “The scourge of pension scams continue with the scammers taking advantage of people being disconnected and not fully understanding their pensions”.
Thankfully the Pensions Scams Industry Group (formerly the Pensions Liberation Industry Group) has identified the shifting nature of pension scams and on 22 June they issued an updated Code of Good Practice (“Combating Pension Scams”).
The industry group consists of voluntary representatives from consumer bodies, trade bodies, trustees, administrators, providers, legal experts, technical experts and other industry bodies.
The first version of this Code of Good Practice was issued three years ago in 2015. According to Margaret Snowdon, chairperson of the Group, it has helped prevent thousands of unauthorised payments since its launch. Margaret has labelled the second version as “bold and informative”.
Indeed, the second version of the Code includes more case studies (including examples of real decisions taken by real schemes) and template letters and forms, all of which indicate a focus on ensuring the Code is user friendly.
You will recall from past editions of Clive’s ready reckoners that legislation to ban cold calling has been passed and will be effective in 2020. It is hoped that this modernised Code will help to plug the gap until that law comes into force. Although it is no mean feat, Aviva conducted a study which indicated there were around 2.2bn nuisance calls and texts in 2017 alone (the equivalent of 6m a day!).
Education remains the key, however, and Margaret Snowdon has called for investment similar to that seen in relation to the PPI debacle, to educate the public about pension scams. The FCA and the Pensions Regulator are also doing their bit – this month they wrote to several high profile schemes (including Lloyds Banking Group and J Sainsbury) to warn them about rogue advisers targeting defined benefit savers, saying they have learned from the lessons with British Steel Pension Scheme where they didn’t move fast enough to provide information and guidance to help prevent such transfers.
For anyone who believes they have been a victim of this type of fraud we would be very happy to discuss it with them, but their first port of call should be to report it to Action Fraud on 0300 123 2040.