Strict rules which prohibit pension schemes from giving financial advice are letting scammers get close to members to perpetrate fraud, according to industry experts.
Speaking today (14 October) at the Pensions and Lifetime Savings Association’s (PLSA) virtual conference, Work and Pensions Committee (WPC) chairman Stephen Timms and Pensions Administration Standards Association president Margaret Snowdon revealed the true scale of the pensions scam problem remains unknown due to the increasingly sophisticated tactics used.
During a panel discussion, Snowdon said: “The scammers have an advantage because they can get close to members and are friendly and helpful while they steal. We are too afraid of breaching financial advice rules that we keep our distance, to members’ detriments, and we need to intervene.
“We can’t compete with the language scammers use when we use acronyms and 12 page documents. We need to get closer to members, talk to them in their language and help them at key points in their journey.”
“It takes a lot of work,” she said, because “people are easily misled by the lure of a good deal”.
Timms urged: “There is no doubt about the devastating impact for victims of the crime… It really is a life destroying crime which at the moment is carrying on in almost unchecked way and we’ve got to make some significant changes to dealing with it.
“People carrying out these crimes are ingenious, well-funded and well placed to keep one step ahead.”
Snowdon noted the pensions industry particularly needs to get better at dealing with pension transfers. She said: “It is important that any advice on transfers includes what will happen to the money after the transfer. Too many funds transfer into unregulated investments afterwards; the future destination is very important and could render the advice to transfer inappropriate.”
While Timms said the introduction of the cold calling ban in 2019 had helped the issue, scammers have now “moved overseas outside of the jurisdiction of the ban, and moved online”.
“They are offering people free investment reviews and someone who takes advantage of such an offer is outside the scope of the ban. We need to keep up with ingenuity of people who are committing these crimes, it is very, very important that we make a change,” he added.
Snowdon argued: “Our job still isn’t done… Scams are becoming much more sophisticated and I am concerned Covid-19 will create the perfect environment for scammers to fleece people out of their savings.”
Timms added: “There is a great deal for us to consider on the select committee and it goes to the dependability of pensions and the trustworthiness of the pensions industry. I hope the select committee can come up with some fruitful proposals that will make a difference.”
This comes after Timms revealed he would seek to allow schemes to pause a transfer when a scam is suspected after research revealed more than £31m has been lost to scams since 2017.
This in turn followed the WPC’s announcement of a three-part inquiry into the success of pension freedoms between 2015 and 2020, the first part of which will focus entirely on pension scams.