The Pension Scams Industry Group (PSIG), the voluntary body set up to support Trustees, providers and administrators in combating pension scams, has released its study findings[1] on the scale of scam activity affecting pension scheme members. It specifically reviewed suspected scam cases flagged by pension schemes on transfer requests.
The report found that 52% of suspected scams involved an unregulated introducer, an adviser in a different country from the member, or an adviser who appears on an internal watch list because of previous concerns.
A major concern highlighted in the report was the lack of member awareness. In 49% of cases, the member had limited understanding or appeared to be unaware of who was providing the advice, the fees being charged, or the receiving scheme to which the transfer would be made.
Additionally, 20% of suspected scams related to the terms of the transfer including investment returns, guarantees made or the ability to access funds. Another 19% of suspected scams related to the receiving scheme itself being suspicious.
It also found that 12% of suspected scams involved cold calling or similar.
Jonathan Watts-Lay, Director, WEALTH at work comments;
“It’s concerning that so many individuals have a general lack of understanding and awareness around where and who they are entrusting their life savings with.”
He adds; “As the research shows, pension scams are evolving and moving away from traditional cold calls. The FCA recently reported that more people are being targeted online through emails, professional looking websites and social media channels such as Facebook and Instagram. Events in recent times have also highlighted how factory-gating is being used as a means of contact by potential fraudsters.
It is therefore important not to over-rely on the new cold calling ban as a way of preventing all scam activity, as it’s not going to stop all fraudsters – especially those who are now using more sophisticated methods.”
Watts-Lay explains, “The PSIG point out that when Trustees can talk to members, they are better able to communicate their concerns and prevent suspected scam activity from going ahead. It’s therefore important to engage members with their pensions before any decisions are made about them.”
He comments; “Financial education and guidance at-retirement can help with this, as members are more likely to make informed choices; including being able to decide if they need further support such as regulated advice.”
Watts-Lay concludes; “There is a duty of care to have processes in place to help members and employees understand how to protect themselves. But, it’s not enough just to put these services in place – schemes and employers should ensure that reputable firms are sourced which have been subject to thorough due diligence, as well as agreeing consistent and fair pricing. This would make the whole process far more robust.”
[1] https://docs.wixstatic.com/ugd/ca2947_529582a813cb457a80ba48cb1e20c8b0.pdf