When pension freedom was first announced in 2014 many people in the industry warned there would be a rise in scammers and savers would be poorly equipped to deal with them.
These fears are becoming reality, with The Pension Regulator (TPR) revamping its scorpion campaign to warn of the dangers as “thousands” of people are falling for scams.
A report from Citizens Advice, Too good to be true, finds people are receiving high levels of unsolicited calls, with 10.9 million having received unsolicited contact about their pension since last April. This includes 2.4 million consumers aged 55-64, of which 33% reported being contacted since April 2015.
Shocking findings
The figures are very worrying given scams are most frequently initiated by unsolicited telephone calls.
The research was compiled to understand consumer experience of scams a year after the April freedoms. It is based on analysis of the experiences of Citizens Advice’s clients, staff and the general public, drawing on a range of different data sources.
Almost half of its staff think there has been a rise in the total number of scams while 42% believe there has been a rise in scams targeted at over 55s. One in three staff believe there has been an increase in liberation scams aimed at under 55-year-olds.
Citizens Advice said it is increasingly difficult for consumers to identify a genuine pension offer. Its data shows some legitimate and Financial Conduct Authority (FCA) authorised firms are using similar practices and tactics as scammers or non-authorised firms.
There is a huge mismatch between peoples’ confidence in spotting scams and their ability to do so. Despite three in four people saying they were confident they could identify a scam, just 12% were actually able to do so when a scam was presented to them.
Almost two-thirds of consumers would consider an unsolicited offer about their pension and many would only consult informal sources about whether the approach is genuine.
Almost half of those who would consider an unsolicited offer said they would look up a company’s website and more than a third would discuss with family, yet just one-third would check the company is listed on the FCA’s online register.
Worryingly, just over half of Citizens Advice staff said few clients over 55 know what to do if they have been contacted by a scammer.
The ways that scammers are operating is changing. Before April 2015 scams commonly focused on liberation and investment offering high rewards, but recently the body has observed a growing number of calls offering reviews and advice. It estimates two million consumers aged 55-64 have received unsolicited calls offering a pension review or pension advice since April 2015.
Dalriada Trustees trustee representative Mike Crowe said the findings confirm his concerns.
“They show cold calling is a very real problem for consumers in that it’s a major route for scammers to contact the potential victims, and that the sophistication they’re adopting is quite high.
“It shows the examples of things that pull people in – offers of high returns, glossy website, the apparent legitimacy of the offer, and high pressured sales.
“From the front end, it’s very difficult for consumers to actually spot the scam from the genuine.”
Action needed
These galling findings are depressing to those in the industry who warned this would happen.
RSM head of pensions Ian Bell said: “The government has opened the box and the trouble with fraud is once you open up the opportunity, fraudsters get on the band wagon and take advantage of it as much as they can until something is done to close the loophole.
“In the meantime, a lot of people are going to be affected very badly.”
He warned that freedom and choice has actually legitimised liberation, which although was a big issue prior to April 2015, it was being clamped down by TPR.
“Now, if someone gets a phone call saying ‘you can access your pension early from 55′ this sounds very feasible, whereas previously scammers were getting people to do something they weren’t allowed to do,” he added.
Crowe called on the government to take action before things get worse: “While information is out there, such as the scorpion campaign, it doesn’t seem to be enough. There needs to be some form of government-led intervention so protections are put in place and that scammers’ route to the money if effectively cut off at its source.”
As well as having an obvious detrimental impact on people, scammers are posing a risk to the whole pension system. Two in five Citizens Advice staff think the threat of pension scams is reducing their clients’ level of trust in the broader pensions system.
Bell agreed it is causing damage: “If pensions get bad PR, distrust will come to the fore.
“The worst thing for the industry would be some big scam that turned people off pensions altogether.”
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