Warned scam victims must take responsibility, code says

In the past 12 months, 23 per cent of adults have received an unsolicited approach about pensions or investments that could be a scam, according to the Financial Conduct Authority.

Last week, PSIG, which was formerly known as the Pension Liberation Industry Group, updated its code of good practice on combating pension scams.

There does come a point where the member has to take responsibility for his own actions

Margaret Snowdon, PSIG

The code, which is not statutory, seeks to assist trustees, advisers and administrators with protecting members from scammers looking to exploit transfer activity.

It includes expanded template letters for those consulting with members of transfers, which lay out comprehensive due diligence to be undertaken prior to a transfer.

Defined benefit transfers have been fertile ground for scam activity, with the body estimating that up to £1bn has been lost to pension scammers.

Members must eventually take responsibility

Transfers out of schemes have surged in recent years, which has raised concern over the true extent of scam activity.

Between January and December 2017, transfer volumes came to £30.9bn, up from £24.3bn during the previous year, according to not-for-profit fintech company Origo.

Persuading savers to transfer is not in itself illegal. However, it is hoped that the ban on cold-calling promised by the government in March will reduce fraudulent transfer activity.

Margaret Snowdon, chair of PSIG, encouraged greater communication between administrators and members if a scam is suspected.

The code recommends that schemes talk to members directly where possible when collecting information for due diligence on a transfer. Checklists are designed to flag up specific areas of concern for further investigation.

The discharge form, which the member needs to sign when transferring, highlights the risks of transfer, and that by proceeding, the member accepts responsibility.

“We think this gives ample warning to members and only the most foolhardy or determined will continue to transfer where due diligence reveals issues,” she said.

“There does come a point where the member has to take responsibility for his own actions,” she added.

Get to savers before the scammers do

Last week, the regulator took swift action against trustee Gordon Craig, suspending him from acting as a trustee while he is under investigation for fraud in relation to his activity as a trustee of the Optimum Retirement Benefits Plan and other schemes.

From 2015, £13.4m was transferred to Optimum by 288 people. In some cases, members were cold-called to persuade them to transfer.

Lesley Titcomb, chief executive at the Pensions Regulator, likened the current extent of pension scamming to an iceberg. “You only ever see one-tenth of it. The other nine-tenths sit below the water,” she said.

The code encourages savers to engage with the Pensions Advisory Service, and pushes schemes to refer members insistent on transfers to the body.

Michelle Cracknell, chief executive of TPAS, underlined the importance of communicating with savers before they receive contact from scammers.

“Undoubtedly, from the calls that we received, once the scammer has spoken to the member of the pension scheme, you’ve almost lost them”, she said.

Pre-emptive action and use of the PSIG code will support lawmakers and regulators in their efforts to stop scams, according to Cracknell.

“Legislation will not stop pension scams. The regulator cannot by itself stop pension scams,” she said.

Victims of scams need support too

Earlier this year, the Work and Pensions Committee said UK government and regulators had failed former members of the British Steel Pension Scheme, and had done “too little too late” to stop unsuitable advice.

Henry Tapper, director at consultancy First Actuarial, praised the code, but called for greater support for the vulnerable, and those who have been victims of pension scams.

“What about the people who have already been scammed?” he asked, adding that “the Pensions Regulator really could do more” for scam victims.

A spokesperson for the regulator pointed to its recent suspensions of trustees related to scams and a January High Court order demanding that four scammers repay £13.7m they took from members.

The spokesperson said: “TPR is at the forefront of efforts to clamp down on the activities of scammers and to build up awareness of what people can do to protect their pension. We focus on strategic cases where we consider we can have the greatest impact for the available resources. We work with other agencies where they are better placed to take action.”