WEALTH at work’s latest survey* with the Pensions Management Institute (PMI) has revealed that 94% of Trustees fear their members approaching retirement will be targeted by scammers.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “Pension scams are a persistent problem which has a devastating impact on those who become victims. Our research shows that Trustees are well aware of this situation and have great concerns for their pension scheme members.”
Earlier this month, the Pensions Administration Standards Association published its Counter Fraud Guidance for UK pension schemes, Trustees, and providers, after revealing industry research which showed that fraud is costing the pensions industry £6.2bn per year, and since 2007 the cost of fraud has risen by over 40%. Furthermore, the Pension Scams Industry Group (PSIG) estimates that £10bn may have been lost to pension scams by 40,000 people since 2015.
He warns; “People getting scammed out of their hard-earned pension savings is a problem that has been around for some time and not likely to go away any time soon. Unfortunately, the exact number of those who are scammed is likely to be higher than the official figures. It is thought that scams often go unreported and individuals may not even realise they have been scammed for some time after it.”
Watts-Lay adds; “Defined benefit (DB) pension transfers are a particular area of concern, and the latest reports from the XPS Pension Group highlight that a staggering 55% of transfers show at least one warning sign of a potential scam or the potential for poor member outcomes.”
He comments; “There are some key measures that the regulators have brought in to help the situation. For example, The Pensions Regulator (TPR) has asked Trustees to pledge to do what they can to protect scheme members. This includes providing regular scam warnings, encouraging members considering cash drawdown to access guidance services, carrying out checks, and provide warnings on high-risk transfers.
Also, the Pension Scams Industry Group (PSIG) has updated its Code of Good Practice. It recommends that when concerns of pension scams have been identified, Trustees should consider telephoning members before any transfer payments go ahead. In addition, all transfers of concern should now be reported (not only those which are refused). The PSIG’s three core principles remain the same including raising awareness of pension scams for members and beneficiaries; having robust processes for assessing whether a scheme may be operating as part of a scam; and being aware of the known current scam strategies.”
Watts-Lay outlines what else can be done to prevent this situation; “Trustees and employers play a key role in ensuring members make informed choices concerning their pensions. This includes providing financial education and guidance as it can help members understand their options and what red flags to look out for. It can also help them to decide if they would like further support such as regulated financial advice, although this, of course, is a requirement for anyone looking to transfer a DB scheme over the value of £30,000.”
He adds; “On a positive note, our survey found that retirement support provision is on the up, with 49% of Trustees providing financial education (35% in 2019), 46% providing financial guidance (28% in 2019), and 30% providing facilitation to regulated advice for members at retirement (21% in 2019).”
Watts-Lay explains; “Carrying out due diligence on providers can make the process far more robust. This should include checking that any financial education and guidance providers are workplace specialists with experience in providing support to members. This can help members understand key issues at retirement such as tax implications, risks around DB transfers, and how to spot a pension scam. Due diligence on regulated advice firms should cover areas such as; qualifications of advisers, the regulatory record of the firm, compliance process e.g. compliance checks of 100% of cases, pricing structure, and experience of working with employers and Trustees.
It’s time that Trustees and employers do all they can to stop pension scammers in their tracks and put in place robust processes to support and protect members. This now needs to be about striving for good member outcomes and not minimal compliance, as many years of pension savings can be lost in the blink of an eye.”
*WEALTH at work conducted a survey with the Pensions Management Institute (PMI) to investigate the concerns Trustees have for their pension scheme members in the run-up of their retirement and what support provisions they are putting in place. The survey received 63 responses from a range of Trustees which were completed online from June 2020 to April 2021. The full results can be viewed here: https://www.wealthatwork.co.uk/corporate/2021/06/21/overcoming-risks-retirement-2021/
Notes to editors:
WEALTH at work is a specialist provider of financial education and guidance in the workplace supported by regulated financial advice for individuals. This service helps employees make informed decisions to improve their financial wellbeing throughout their careers and to maximise income at retirement. As there is a growing need to provide support for pension scheme members at retirement, our services are also available for Trustees to help their members fully understand their retirement income options and how to mitigate associated risks. For more information, visit www.wealthatwork.co.uk
For further information, please contact the WEALTH at work press office on 0151 255 3468 or 07766785831 or email [email protected]