Pension schemes and providers have been urged to increase member awareness of scam tactics and tighten data security, amid the revelation that average losses from fraudulent and inappropriate inducements eclipsed the size of the average pension pot in the UK.
The Pensions Regulator and Financial Conduct Authority on Monday launched a joint media campaign to combat pension scams, including TV adverts warning against taking free pension reviews by phone.
Victims of scams lost £91,000 on average in 2017, according to statistics published by the regulators – more than the median level of pension wealth in the UK, which according to the Office for National Statistics hit £58,000 over the two years to June 2016.
Occupational pension pots for 55 to 64-year-olds, one of the most commonly targeted demographics, were £104,000 on average, meaning a scam could wipe out their retirement prospects.
If you think about the amount of data that is contained in a simple statement of benefits that is an identity theft goldmine
Mike Crowe, Dalriada Trustees
Evidence is also emerging that many consumers are poorly equipped to deal with the threat posed by scammers.
A survey commissioned by the regulators found that 32 per cent of pension holders aged between 45 and 65 do not know how to check whether they are speaking to a legitimate pensions adviser or a scammer.
Twelve per cent said they would trust a “free pension review” offered by an unknown adviser, a classic tactic of fraudsters.
Nicola Parish, the Pensions Regulator’s executive director of frontline regulation, alluded in a statement to the intention of the government’s forthcoming ban on pensions cold-calling, due to be laid in regulation in autumn.
“£91,000 is a huge amount of money for someone approaching their retirement to suddenly have ripped from their savings,” she said. “If someone cold calls you about your pension, it’s probably an attempt to steal your savings. Our message is clear – hang up and report it.”
Schemes an obvious point of contact
Much of the response to the growing threat of pension scams has focused on the government’s response, with pressure to implement the ban on cold-calling coming from industry figures and politicians alike, Liberal Democrat MP Stephen Lloyd called the delays to the policy “an absolute disgrace”.
But there have also been calls for pension schemes and the companies that help them provide for members to take action of their own.
Education and warning members of the dangers of scams are the most obvious ways to achieve this. Steve Arnison, commercial director and head of sales at LexisNexis Risk Solutions, said: “It really is an education and an awareness drive that we need in that area, because the weakest link is the consumer.”
As a trusted body with links to the member’s employer or former employer, schemes can leverage their relationships to make anti-scam messages hit home.
They may want to avoid creating their own tailored engagement strategies, given the strength of government and regulator-led attempts that are free to use, according to Mike Crowe, a trustee representative specialising in scams at Dalriada Trustees.
He said the scorpion campaign, which was revamped by the Pensions Regulator in 2016, “has got really good literature” and could easily be included in responses to transfer requests.
“The tools are out there to use,” he added.
Clean your data
Unless the statutory right to transfer a pension is limited, education will likely be the only tool available to the industry when addressing investment scams, where members consent to moving their money into rip-off funds that are often based overseas.
However, improving data security can help schemes defend against a range of frauds involving identity theft, which continue to appear in the UK.
Many schemes still write to members with details of benefits and other personal information, but not all check that an address is up to date.
“If you think about the amount of data that is contained in a simple statement of benefits… that is an identity theft goldmine,” said Crowe. “Making sure you clean your data regularly and making sure you have got everything up to date is pretty critical.”
Personal information could then be used to help a scammer steal a lump sum payment from the scheme, or indeed to perpetrate existence fraud after a member has died.
“Why not check from a digital perspective that those individuals that you’re going to write to are actually resident [there]?” asked Arnison.
