By Fiona Tait, Technical Director, Intelligent Pensions
The Pension Policy Institute (PPI)’s recent report “How have scams evolved since the introduction of pension freedoms?” shows that for these people it’s just business as usual and fraudsters continue to look for new ways to target potential victims.
The COVID effect
The pandemic has not really affected the way in which scamsters operate or the types of scam they are perpetrating, what it has done is make people more vulnerable to their blandishments. People who are facing significant reductions in their income, or who have seen the value of their fund drop as a result of market uncertainty, are more likely to listen to fraudulent promises of access to their pension funds and promises of ‘safe’ investments and higher returns. As a result, both the FCA and the Pensions Regulator (tPR) have issued bulletins to investors and trustees respectively warning people not to act too hastily with regard to their pensions.
This warning is necessary, as one of the key techniques used by scammers is to put pressure on people to act quickly; research carried out as part of the ScamSmart campaign showed that 1 in 4 people admitted they took less than 24 hours to decide whether to accept a pension offer.
Pension Freedoms
Unsurprisingly, this was the real game-changer in the pension arena. Prior to 2015 the majority of scams focussed on pension liberation. This involved scammers tricking people into transferring their funds to offshore arrangements which allowed them to access their savings – after a sizeable fee had been siphoned off by the fraudster.
This has now been made easier for the scammers since all they have to do is target anyone over the age of 55 who can legally access their funds and withdraw the whole lot if they want to. Pensions are becoming increasingly likely to be an individual’s biggest asset and the consequent impact is often devastating. In 2018, 180 pension savers reported losing an average of £82,000 each to scammers, equivalent to 22 years’ of minimum contributions under automatic enrolment. Many of course lost more, with Action
Fraud having been informed of at least 2 fraud cases involving over £1m. And those are just the ones that are reported.
Why is it still happening?
The simple answer is that the scammers are very, very clever. Scams are constantly evolving and becoming more and more sophisticated. Since the ban on cold calling more are using social media and other on-line approaches, accounting for more than half (54%) of those who were inspired to check the FCA Warning List.
It doesn’t help that people tend to be over-confident of their own ability to spot a scam. The websites and letters often look very professional, and phishing – copying legitimate organisations and websites – is common. While 64% told the ScamSmart investigators that they thought they could spot a scam only 12% of people asked by the Citizens Advice Bureau were able to do so, and the FCA point out that this trait is even more prevalent among educated people. This was backed up by research from PensionBee who found that the majority of people tend to believe the victims of scams are likely to be other people.
What can we do about it?
Keep fighting. Everyone is potentially vulnerable to a scam and it is incumbent on anyone with specialist knowledge to do what they can to protect others. By specialist knowledge I include those who have been victims of or approached by a scammer themselves, however the onus is even more upon the professionals to support their members and clients.
It is already a requirement to include ScamSmart warnings with pension transfer and retirement packs but we can go further than this. Links can be provided to ScamSmart, The Pensions Advisory Service and Pension Wise websites, however there is nothing stopping us from reiterating the warnings they contain.
Trustees and providers may want to check out the Pension Industry Scams Group (PISG) code of practice – it is 107 pages long and therefore very comprehensive as a source of reference. Consumers and advisers have recourse to the ScamSmart website and the specific warnings issued by both the FCA and tPR.
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