• Two in five (37%) of adults in the UK believe they have been targeted by a scam or fraud since lockdown started on 23 March, according to new research of 2,000 people*
• The figure rises to almost half (45%) for those aged 55-64, showing scammers are targeting those who have recently gained access to their pension savings
• AJ Bell sets out five ways the Government and regulators can take the fight to pension scammers
• Recommendations come in response to Work & Pensions Committee’s wide-ranging inquiry into the pension freedoms reforms
• Tackling online fraud, improved monitoring and reporting of scam activity, and giving schemes power to block suspect transfers all key to protecting retirement savers
Tom Selby, senior analyst at AJ Bell, comments:
“The financial uncertainty created by the COVID-19 crisis is like blood in the water for scammers, with a huge proportion of the UK population believing that they have been targeted during lockdown.
“Over a fifth of people have already been made financially worse off during COVID-19 and as the Government prepares to end the furlough scheme, millions more people will face the prospect of unemployment, losing their main source of income and staring down the barrel of serious financial hardship. Such turmoil will inevitably see more people targeted by scammers, with their hard-earned retirement pots likely to be a prime focus.
“In this environment it is absolutely vital policymakers, enforcement agencies and the wider pensions industry redouble efforts to tackle the scourge of fraud.
“While clearly the priority for Government is dealing with the second spike of the pandemic, it is also important to ensure a protective ring is placed around vulnerable savers.”
Five recommendations to tackle pension scams
1. Following the cold-calling ban, the Government should take action to stop the rise of online fraud, social media fraud and impersonation scams
The pensions cold-calling ban could be broadened to include ‘factory gating’ where lead generators meet prospective clients in person and make the introductions to unscrupulous financial advisers.
Government and regulators should also explore how the ban could also be extended to cover social media, emails and text.
Finally, the ban could also be widened to include all investments, rather than just pensions. This could prevent scammers from getting around the rules by offering an ‘investment performance review’.
2. Improved reporting of scam activity to the FCA and Action Fraud
Action Fraud will identify whether to investigate a scam based on a scoring system and will only investigate once a scam has been reported by several different sources or is of a large enough size. Therefore, no action will be taken for a single scam of a different model (unless the value is large).
We would like more guidance from Action Fraud on what scams to report and how to report. We believe there is the risk that several different sources are reporting scams in slightly different ways or referring to slightly different models, with the result that no action is being taken on investigating these scams.
But if taken collectively these individual cases represent a wide-spread scam where collectively large sums of money have been lost, and better reporting would enable these scams to be investigated as one rather than slipping under the radar individually.
3. Improved information sharing between financial services companies
Often scammers try the same scam or tactic at several different companies. If these companies can share knowledge effectively – on individuals or investments or schemes – then it would help to close or prevent a scam.
That information sharing could take the form of a database. The industry already has sharing mechanisms – informally, as well as on a more formal basis.
Often the focus of industry groups is on scams originating from pension liberation transfers. This needs to widen to include other types of scams – for example investment scams, such as investment in listed corporate bonds.
4. New transfer regulations in the Pension Schemes Bill
Future regulations arising from the Pension Schemes Bill are expected to require trustees to determine whether there is a statutory right to transfer. They will achieve this by checking:
• whether a receiving scheme is regulated by the FCA
• is an authorised master trust
• there is a genuine employment link between the member and the scheme
• whether it meets the requirements of a transfer to a QROPS in certain circumstances
These rules should give providers greater power to block suspect transfers without impacting on people’s ability to genuinely transfer to a legitimate scheme.
5. Continue to monitor scam activity and act where possible to protect savers
Our experience has shown that preventing pension scams is not a one-off piece of work. We are continually witnessing the type and style of pension scams change and evolve.
It’s therefore important policymakers and the wider pensions industry recognise this and can change their detection and prevention tactics accordingly. Regulators and police authorities need to continue regular reviews of pension scam tactics in tandem with the industry.
There is a concern that the regulatory focus is on a narrow range of scams and it is easy for scammers to evolve these into other areas to avoid detection.
*Survey of 2,031 UK adults conducted online by AJ Bell and Find out now on 23 September 2020
