Research by insurance provider Phoenix Group finds that savers are still vulnerable to scams and are not listening to warnings from pension providers, according to Hope William-Smith in an article for Retirement Planner, published on Pensions Awareness Day – 15 September.
The article quotes Phoenix Group's risk and financial crime manager and Pension Scams Industry Group deputy chair Tommy Burns, who says: "Worryingly, financial fraud is growing, partly as a result of Covid-19, with scammers taking advantage of the upheaval and the additional financial pressures that some people are facing."
Burns says in the report that pension scammers will try and encourage pension savers to transfer their money to them, therefore risking their life savings. "Those who fall victim can face financial ruin as a result of passing over personal data and just one fateful signature on a piece of paper, which transfers their pension into the hands of the scammers."
Phoenix Group has called for an amendment to the Pension Schemes Bill, proposing that an individual's statutory right to transfer their funds is limited further, reports William-Smith. This would allow pension companies to do more to protect their savers and tackle pension scams, says Burns.
"One of the very best ways to avoid being scammed is to learn more about the risks and to recognise when alarm bells should be ringing," he says.
Retirement Planner article
Keeping your pension safe
The pensions sector is warning that savings worth £2.5tn are exposed to scammers due to poor protection, reports Ben Wilkinson and Robert Jackman in a This is Money article. "This colossal figure is the cash that pension savers are now free to move out of their workplace scheme if they so choose," they write, due to the pension freedom reforms of 2015.
Wilkinson and Jackman say that "money cons" have seen a spike this year due to the Covid-19 pandemic, with victims losing £356.6m in July alone. This is nearly four times the £92.3m lost in March, they write.
The People's Pension, a workplace pension scheme, and the Police Foundation, a thinktank, are urging the government to hand firms and regulators the power to put a stop to a scam if they identify one, the writers report. "Currently, pension schemes can only warn a customer if they spot a suspicious transfer request. The People's Pension found scammers last year targeted £54m – £31m of which was still moved to dodgy schemes after such warnings." However, high street banks can alert police and freeze money transfers if they suspect fraud. This has prevented £116m worth of cons and resulted in 744 arrests over three years, write Wilkinson and Jackman.
Jon Greer, head of retirement policy at Quilter, is quoted in the article. He explains that the lack of police action works in favour of scammers. "If you are mugged, it's highly likely that the police will investigate; but lose your life savings to a pension scammer and your odds don't look good."
Former pensions minister Baroness Ros Altmann is quoted as saying the law "is too balanced in favour of the scammers". She also said that because there are a lot of customers who don't understand pensions, when they receive a convincing sounding phone call, especially during Covid-19, "the sales job for the scammers is easier than it has ever been".
Wilkinson and Jackman refer to previous frauds involving victims being cold-called with an offer of a free pension review, "a tactic that helps fraudsters find people of the right age with sizeable pension pots". The government has banned cold calls regarding pension products, so any unsolicited call is likely to be fraudulent, they say.
If a scammer invests your money, for example in an overseas project that is unregulated, this won't be covered by the Financial Services Compensation Scheme.
This is Money article
Pension scam reporting
A freedom of information (FOI) request from financial services company Quilter reveals that only 6.6% of pension scam reports were passed to the police for investigation in 2019, a Pensions Age article by Sophie Smith reports.
The FOI request reveals that out of 394 reports to Action Fraud, just 26 of these were passed to the police. "Quilter explained that pension scams are 'extremely complex' and require considerable police resources, meaning that Action Fraud and the investigatory agencies are forced to prioritise cases they believe can lead to a successful criminal justice outcome," writes Smith.
So far in 2020, 161 pension fraud reports have been received by Action Fraud, and 24 have been passed to the police force, following a review by the National Fraud Intelligence Bureau.
As part of the Work and Pensions Select Committee's ongoing inquiry, Quilter is calling for a new measure to be introduced to help protect victims, in particular, urging the government to include scam adverts, fake websites and other financial harms within the scope of the Online Harms Bill, reports Smith. This is due to be introduced to parliament next year.
Pensions Age article
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