Combating pension scams – It’ll take a village

 
It’s not our fault that scammers continue to find opportunity to prey on vulnerable pension scheme members, but we’re the only ones with a hope of spotting the rogues, because members certainly can’t. For the sake of members and ourselves, trustees and providers must do all they can to stop dodgy transfers.  

 

We need to keep learning as scammers continue to evolve. 
 
I’ve been writing about the eye-watering risk of scams for many years, but until recently authorities have tended to underestimate the magnitude of the issue, meaning they’ve unwittingly given scammers enough space to keep attacking members. Rogues are out there, they’re active and always a step ahead, but the industry can make it more difficult for them.
 
Most of us know about pensions scams these days, but new threats continue to emerge. International SIPPS, investment deals offered to people who take their cash from their pension scheme under pension freedoms, and claims management firms who target schemes as the most likely source of compensation for previous transfers, are all notable examples.  
 
Adequate due diligence helps us to spot threats early on. The strong due diligence in the Scams Code [scams code] reveals those threats and gives trustees the chance to stop members making a terrible mistake. Schemes and providers must adopt its principles, if they don’t, they leave themselves open to claims for compensation in future. Publicising the strength of due diligence could act much like a house alarm – scammers will give the scheme a wide berth and seek easier prey.
 
There is criticism that the authorities are unable to catch the scammers. Well, scammers are slippery and building fool proof cases against them is very difficult, so we ought to have patience. In the meantime, we must endeavour to stop money going to scammers in the first place. It’s too late after the event, our focus should be on prevention. 
 
More recently, we’ve seen the rise of the secondary scammer and claims management firms. It’s hard to believe, but when someone has been scammed, they are vulnerable to being scammed again. There’s awful people out there willing and able to cash in on this by offering to help the member get the lost money back. We all know that the chance of getting money back from a scammer is remote, but being scammed makes people even more vulnerable. They desperately want to believe that someone can help and willingly pay fees to get it. But guess what? The fees are paid and little, if any, help is given.  Good money has then been paid after the bad and victims spiral downwards. This needs to be stopped.
 
To make matters worse, tax law shows no sympathy for the plight of scams victims who’ve lost their pensions. They can be asked to pay unauthorised payment tax charges on top. This is totally unfair especially given the credibility of scammers, the fact that in many cases the scams involve schemes that used to be on the HMRC registered list and victims were advised by FCA regulated advisers. The law needs to change to reflect the reality of the times.
 
We have a mess, so what can we do?
 
Report potential scams - If we don’t report, authorities think scamming is not a big issue. PSIG is already working to improve the reporting to Action Fraud. Once an efficient system is in place, a unified approach reporting potential scams will be needed to create an accurate representation of the scale of the issue.
 
Talk to members - Paper is impersonal and actually helps scammers.  Scammers get up close and personal and use that skill to persuade consumers to part with their money.  PSIG recommends asking members early on some important questions about their request to transfer. We know it takes time and skill, but a conversation can be highly revealing and also save time and effort in the long run. 
 
Talk to members…again - The August relaunch of the regulators’ ScamSmart campaign will help to raise awareness among the public about the risk of scams further, emphasising that members often can’t spot a scam. This in turn can help to reduce stigma that might prevent members from reporting their experiences. 
 
The industry has a great opportunity here to change our ways and talk directly to customers about the risks and where we have concerns. The ScamsSmart campaign should be helping to open the door a smidge; we need start pushing on it. With persistence, we will win. We need to.