This increased reporting of “red flags” show that scam awareness is improving. June 2018’s revision to the PSIG Code of Good Practice encouraged direct interaction with members to help identify some of the key “red flags” for potential scam activity. It also introduced a greater focus on assessing members’ awareness of the fees and charges related to their proposed transfer. Talking directly to a member about their transfer increases the likelihood of discovering red flags and some of the key ones XPS have identified are:
• Lack of awareness around fees
• Confusion around the IFA process
• Misunderstanding the transfer process
Most cases with a red flag don’t turn out to be scams but an increased recognition of warning signs is a positive step forward. The further revision to the Code of Good Practice on Combating Pension Scams published this week will continue to help the Industry tackle this ever evolving threat. It is important that trustees and employers continue to help members understand both their benefits and their options. All too often it is a lack of understanding that creates opportunities for scammers.
The ban on pensions cold calling earlier this year, tougher rules to stop scammers opening fraudulent pension schemes and a number of successful criminal convictions have been sighted by the pensions industry as key developments in protecting people from pension scams. However, this is just the start. We, as an industry, have a duty to continue to raise scam awareness and encourage communication between members and their schemes.
Good communication starts by knowing who to turn to in the case of suspecting suspicious activity, for members this includes:
• Their own pension scheme administrators
• ScamSmart website
• Money and Pensions Service
• Citizens Advice Bureau
Wayne Segers, Principal, XPS Pensions Group said: “Over the last year we have seen a big increase in the number of warning signs being identified for potential scam activity on pension transfers, from one-in-eight in June 2018 to one-in-three in June 2019. Fortunately, not all turn out to be scams but it is good to see an increased understanding of the warning signs. Our Scam Identification team identified the red flag warnings by speaking directly to members, which is a key part of the data gathering process.”
In the last twelve months to 31 May 2019, XPS’s Scam Identification team have handled 969 member transfer cases, representing transfer values totalling £214,000,000.
Wayne continued: “Pension schemes need a system to identify scam activity, such as our specialist telephone service, however it is also important that schemes help their members better understand their pension entitlements and the fees that they could expect to incur. This will reduce the opportunities for scammers to trick them.”
Margaret Snowdon OBE, Chair of PSIG, said: “The risk of pension scheme members being scammed increases as they are faced with more choice and the current laws do not help to protect them, in fact they cause further confusion. On average, members lose £91,000 of their pension savings through scams which can have a devastating impact on their later life. The revised Code of Good Practice published this week is another big step towards helping protect members, but they also need help to help themselves. An excellent way to reach them and help prevent the loss of further pension savings to scams is to talk to them directly about their transfers, as the scammers do. Scam Awareness Fortnight is a great opportunity to reach out to all members of pension schemes to make them aware of the very real risks from the criminals looking to steal their pension savings.”
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