Are you doing enough to protect your members from scammers?

Scams can take many forms. Perhaps most commonly, victims are lured in by someone who claims to have found a legislative loophole that will allow members to release pensions savings after a transfer of their funds, or they offer highly attractive promises on investment returns.

To establish trust with scheme members, communication is key. Trustees should consider how they can become more visible, so as to boost member trust

Of course, funds released to those aged under age 55 are likely to be classed as unauthorised payments by HM Revenue & Customs and will be subject to penal tax charges.

Added to this, the scammer (rather than the scheme member) is likely to benefit from the rest of the transferred funds, including investment returns. The biggest problem is that the level of public confidence in the pensions industry is low enough for scheme members to be drawn into these situations.

Trustee visibility boosts member trust

Why do scheme members, who have been careful enough to make pensions savings, trust a total stranger – who has found a ‘loophole’ – rather than their scheme trustees? 

I will answer that question with a further two questions. How many of you reading this article have a private pension? And how many of you can name the scheme trustees (or even some of the trustees)? Probably not many of you. That is part of the problem.

The scammer – I will call him Fred – will be very visible to the member. Fred will be accessible, and will speak in terms the scheme member can understand.

He will present figures, talk about good investments and will create a bright future. In contrast, pension scheme trustees only tend to become ‘real’ if the member accesses the latest report and accounts and sees their photographs.

Trustees may believe they are giving warnings on pension scams because they add a paragraph to the end of the annual newsletter and provide a link to the Pensions Regulator’s scam warnings on their website.

However, it is not clear that all members will see this type of information, or recognise its relevance to them when they are approached by a scammer.

Once a member is part way through a pension transfer process, any scam warnings from the scheme may be too late. Fred will have established a relationship with the member and will say that the unknown trustee body is trying to stop the member from taking money out of the scheme – in other words, Fred will establish an ‘us against them’ position.

To establish trust with scheme members, communication is key. Trustees should consider how they can become more visible, to boost member trust.

Employers can help disseminate key info

Communications do not have to be expensive, but they do need to be well targeted. For example, an engaging, brightly coloured poster on an employee notice board about pension scams might attract attention and generate discussion among the workforce.

For deferred members, perhaps an email purely dealing with pension scams would be noticed? Trustees could also consider getting messages out on social media.

Employers also have a key part to play in disseminating important pensions information. There are many ways of communicating, but a consistent, repeated message via multiple media and from different sources may help reduce the number of scam victims.

Of course, pensions cold calling will be banned in the near future. This is good news, but will only help if it is accompanied by a widespread public information campaign to raise awareness.

Determined fraudsters are unlikely to be deterred by risks of a fine from the Information Commissioner’s Office – so the industry should unite to build members’ engagement with, and confidence in, their trustees’ message.

Helen Miles is a pensions partner at law firm Squire Patton Boggs