While the Pensions Regulator has pointed the finger at industry saying all parties must do more to tackle the problem of pension scams, members of the Work and Pensions Committee have questioned whether the regulator has itself done enough to help.
Speaking before the committee in a virtual hearing on pension scams on Wednesday, Nicola Parish, executive director of frontline regulation at TPR, revealed that at least £54m worth of lost pension savings were being investigated by the regulator, with 82 schemes and 18,000 savers affected.
However, Mark Steward, executive director of enforcement and market oversight at the Financial Conduct Authority, cautioned that available figures for the cost of pension scams were likely to be an underestimate, “but it’s not quite clear how high the figure actually is”.
He pointed to one case taken on by the FCA last year that on its own involved up to £90m of pension savings.
The fact of the matter, again it’s already been said, is we don’t actually know what the true scale of the problem is because of the under-reporting issue
Commander Clinton Blackburn, City of London Police
There was disagreement between Ms Parish and some members of the committee over who should do more to counter the growing problem of pension scams, with Ms Parish placing the burden on the pensions industry.
“We’re running a campaign at the moment — we’ve got 100 organisations signed up so far — [and] the push behind that is very much about saying it is really important that we get industry to [report scams],” she said.
Launched in November, the ‘pledge to combat pension scams’ asks signatories to warn members regularly about scams, promote guidance services, document their actions, and clearly communicate their concerns to both members and authorities.
Ms Parish said it was important to encourage victims as well, but “we know the difficulty… with asking victims to report”.
“We think there is much more industry could do here to report in pension scams,” she said.
But Labour MP Debbie Abrahams queried whether the industry has been sufficiently educated by the regulator, positing “a lack of comprehensive understanding” that might prohibit the industry taking the kind of action that Ms Parish would like to see.
Ms Abrahams said the committee had been told by industry figures that they were not always sure when and whether they should contact Action Fraud.
Ms Parish countered that the Pension Scams Industry Group, set up by the pensions industry, makes reporting requirements clear in its code of practice.
Responding to Ms Abrahams’ suggestion that leaving it to the industry “may take a while” to see results, Ms Parish said it was important to emphasise that other sectors, for example banking, have been much more proactive in warning customers of the risks of scams and investment fraud.
“This is what it might look like,” she said.
“I think… we should be calling on the pensions industry to take more responsibility here. And within that the responsibility includes...reporting their suspicions, because that information is vital and they are best placed to access that information. So I do think there is a responsibility on industry here.”
Action Fraud not active enough
Commander Clinton Blackburn, national co-ordinator for economic crime at City of London Police, confirmed that the PSIG’s estimate of billions of pounds being lost to fraudulent activity was plausible.
However, he said: “The fact of the matter, again it’s already been said, is we don’t actually know what the true scale of the problem is because of the under-reporting issue.”
Scottish National party MP Chris Stephens raised concerns about the usefulness of Action Fraud, citing an investigation by The Times that showed the majority of cases of suspected scams reported to Action Fraud had not been investigated.
In response, Mr Blackburn said Action Fraud had seen 820,000 reports of fraud reported in the past financial year, and was faced with “very difficult decisions” over which to pursue owing to issues with funding and resources.
A large part of the solution is educating people to ensure they do not become victims in the first place, he said.
Dangers of unregulated social media
Asked about trends in the activity of scammers, Ms Parish pointed to their evolving nature and the increasing prevalence of social media as a tool to try to defraud people of their pensions.
“We know that a few years ago, particularly, it was about setting up a sham pension scheme and encouraging people to move from their bona fide pension scheme into a sham,” she said.
“More recently, it’s about just encouraging people to come out of their pension scheme into a vehicle that’s being used for investment. So, it’s more of a vehicle for investment fraud than needing to be that sham pension scheme that it was historically.”
Mr Blackburn said that 12 per cent of all reported fraud cases in 2020 featured some form of social media or encrypted messaging software.
Trustee flagged as scam concern banned over ‘serious’ failings
The Pensions Regulator has banned the corporate trustee of the Audax Pension Trust from acting as a trustee, following concerns of improper management and links to potential scam activity.
Mr Steward pointed to the fact that the coronavirus lockdown has led to people spending more time at home and online, and the lack of regulation around social media generally, and social media advertising in particular, as “a very significant driver of the increase in online scams and fraud”.
“It’s very easy for a scammer,” he said.
“Now all they need is an online advertisement, which can be created very easily. The identifying details — names, addresses that might appear on the advertisement — are not checked. Invariably they’re false, so that the scammer has anonymity in that process.”
