Only a restriction of the statutory right to transfer will end pension scams, the Pensions Regulator’s leading trustee company for appointments to irregular schemes has said, as it reported a marked increase in the number of cases dealt with in recent months.
Dalriada Trustees was appointed to another suspect pension scheme on Tuesday, bringing its total tally to four already this year. The company says it is usually asked to step-in around once a year.
In total, Dalriada Trustees has been appointed to irregular schemes with an estimated £130m in combined assets, investments that are often brought in by cold calls. It has won the majority of the Regulator's tender processes for suspicious plans.
The only way to cut off the source of the money is to remove the statutory right to transfer
Sean Browes, Dalriada
“Irregular schemes aren’t going away, there seems to be a lot more of them,” said Mike Crowe, a trustee representative at Dalriada who specialises in statutory appointments by the regulator.
Scams and irregular schemes have evolved in the nature of their promises to victims over the years. Early scams revolved around enticing members to liberate or take their pension early.
Now the majority of cold calls encourage savers to invest their money in unsuitable ventures such as highly illiquid and speculative foreign property deals, according to Dalriada. Victims are lured in with promises of guaranteed 8 per cent annual returns, but in reality they may struggle to get any money back.
Empower providers to stop scams
The company remains positive on the progress of government and industry efforts to stop scams, praising both the cold call ban and the Pension Liberation Industry Group’s work to improve administrators' due diligence.
It also suggested a register of approved pension scheme administrators, which is a feature of the Republic of Ireland’s system, might help savers know when a transfer is safe or not.
However, this will not be enough in isolation, according to Sean Browes, who leads the Dalriada team on suspect schemes.
“If you want to stop this problem you have to cut off the source of this money, and the only way to cut off the source of the money is to remove the statutory right to transfer,” he said.
Industry split on tampering with rights
Such a move has the support of some pension providers, who have previously attempted to block suspicious transfers, only to be overturned and forced to allow it.
“If the individual is fully convinced that this is the right thing for them… they’ll transfer and we can’t stop them, there’s nothing we can do,” said Kate Smith, head of pensions at provider Aegon.
She backed a restriction of the right to transfer, and said it may be useful for an intermediary such as the Pensions Ombudsman to have final say, to avoid stoking the scammer’s narrative that providers are greedily clinging onto assets.
But others are less comfortable with the idea. Tom McPhail, Hargreaves Lansdown’s head of retirement policy, said members’ best interests “aren’t always well served” by the current regulatory framework, but expressed deep misgivings about altering rights.
“Modifying individuals’ current statutory rights to transfer is something we should interfere with very cautiously,” he said, adding that it could undermine confidence and restrict legitimate transfers.
