On the go: The “true scale” of pension scams remains unknown, as only a minority are reported and data is not collected in comparable ways across the industry, the Pensions Policy Institute has warned.
A policy paper from the PPI, published on Tuesday, found that the data available about the number of scams taking place across the industry, as well as the amount lost in each scam, did not offer a comprehensive view of the true scale of the issue. It warned this made it harder to address the problem.
The PPI said the low levels of reporting made it difficult to assess how the introduction of the pension freedoms in 2015 may have exacerbated the problem.
But it found pension freedoms caused a clear shift in the way scammers marketed their tactics. Before pension flexibilities came into force most scams focused on pension liberation, but now they focus on investments.
The PPI found this particularly worrying as it made it harder to combat the issue, since funds often leave the regulatory landscape of pensions.
Investment scams include both transfers to pension schemes that invest inappropriately, as well as flexible access to cash from defined contribution pots in order to invest outside of the pensions landscape.
The former is considered a pension scam, meaning schemes and regulators have powers to intervene. However, because the latter occurs outside of the pension system, intervention is beyond the industry’s and regulator’s remit.
Scams generally offer above-average investment returns, often in overseas investments or alternative assets, which average pension savers are less likely to understand in terms of value and risk. They are also more likely to operate via self-invested personal pensions, small self-administered schemes and qualifying recognised overseas pension schemes.
The PPI also said that scammers changed their processes following the cold-calling ban in January 2019, with victims more likely to be caught online nowadays.
In 2018, 54 per cent of individuals had been contacted by potential scammers via online sources – emails, professional-looking websites and social media – an increase from 45 per cent in the previous year.
This article originally appeared on ftadviser.com
