How the pension fraud action group will tackle scam increase

The group has been set up in response to unprecedented levels of pension liberation cases. Pensions minister Steve Webb said in October that £420m of savings had been transferred to liberation schemes.

The group will be chaired by Margaret Snowdon, who is also chair of the Pensions Administration Standards Association and director at JLT Employee Benefits.

The sophistication of the scams creates challenges for the group, as liberation schemes can quickly adapt their approaches and find new ways to target scheme members, said Darren Philp, head of policy at The People’s Pension and a member of the group.

“You can’t say, ‘This looks like a pension liberation scheme’. There’s a constant cat-and-mouse,” he said. “That’s why you don’t hear what they look like, they are constantly evolving.”

The group will develop a code of practice to set out due diligence for trustees when dealing with scheme members' requests to transfer funds.

“It’s an incredibly important issue that needs to be sorted out. One thing this group is trying to do is give trustees a suite of processes and tools so they know what they are doing," said Philp.  

There is debate among the industry as to how much protection a code of practice will provide.

“Generally, trustees are fairly well protected by law,” said Anne-Marie Winton, a partner at law firm Nabarro. “It’s not obvious that trustees should be particularly worried.”

She added the code of practice would not have legal effect.

It is just one of the measures being undertaken to stop the spread of pensions liberation schemes.

“We’ve already seen a lot of action from the Pensions Regulator and HM Revenue & Customs changing their registration criteria [for registering new schemes]. It’s part of a suite of things,” said Philp.

HMRC has tightened its processes for the registration of new schemes and the transferring of members’ funds in an effort to combat liberation scams.

The regulator must act in accordance with its legislative powers and so has not categorically stated it will not prosecute in the event of a non-transfer.

However, its so-called ‘scorpion’ guidance on pension liberation states: “Where a trustee has obtained evidence that subsequent to a member's transfer then monies would be passed back to the member before their normal minimum pension age, this factor would be given significant weight by the regulator in assessing whether it would be appropriate to pursue any action in relation to a non-payment of a transfer.”

The guidance also advises trustees to seek their own legal advice if they have concerns about a transfer.