On the go: The Pensions Administration Standards Association has unveiled its latest counter-fraud guidance, taking aim at scammers and looking to provide pension schemes with the tools used to counter an increase in criminal acts following the introduction of pension freedoms.
“In recent years, what’s been described as the ‘pension liberation’ reforms have stimulated an increase in frauds targeting those with pensions. This has, in turn, led to an increase in the action by authorities to tackle this problem,” the guidance stated.
“While ‘pension liberation frauds’ have been widely reported in the media, there’s also a wider range of opportunities for fraud across the pensions sector. These opportunities include internal fraud, fraud related to inappropriate investments, and the targeting of pension schemes by external fraudsters, sometimes those involved in organised crime. These incidents have received less attention.”
It explained that the cost of fraud has risen by 50 per cent since 2007, while the incidence of fraud has risen by 21 per cent since the onset of the coronavirus pandemic.
Scammers targeting pension schemes and their members have a range of tactics at their disposal, including identity fraud, “opportunistic fraud” — such as where people claim the benefits of deceased relatives — and “internal fraud” arising from pensions administration, it continued.
The guidance cited research estimating the cost of pension fraud to be £6.2bn every year.
Pension schemes and other organisations should ask “investigative questions” focused on three areas, it stated.
“The legal and regulatory landscape: does the organisation understand the different types of fraud? Is it aware of any emerging threats and ready to react? Has it sought the relevant legal, regulatory and cyber advice?”
“Understanding your organisation’s vulnerability to fraud: does the organisation and its suppliers understand the vulnerabilities of systems and beneficiaries in respect of fraud, and the extent of risk and potential cost?”
“Ensuring your organisation is resilient to fraud: what potential for fraud exists, and how can the risk this poses be reduced to an acceptable level?”
Schemes should ensure they have good governance, risk assessment and mitigation processes in place, while keeping data secure and ensuring that they, and any third-party administrators, have a good working knowledge of the types of fraud that can take place and of measures to prevent them.
Kim Gubler, PASA chair, said: “As a sector we have significant amounts of money being paid and invested every day, but the level of protection in place is much less than provided to the average bank account.
“It’s no wonder the momentum around pension fraud has been growing exponentially. This is an issue we need to tackle head on if we are to maintain control of the situation and to stay one step ahead of ever more sophisticated deception. I urge the industry to read our guidance and take swift action.”
Jim Gee, partner and national head of forensic services at Crowe, added: “Fraud is a pernicious problem. Along with the serious financial damage pension fraud can do to an individual or member, the resulting bigger picture is an undermining of confidence in pensions administration and an eroding of trust in our industry.
“This guidance has been created to provide an understanding of the range and potential for fraud, and a common language about what needs to be done,” he continued.
“The PASA Fraud and Cybercrime Working Group intends [that] the guidance will be regularly updated to match the speed of evolution of the phenomenon of fraud itself.”
