Jonathan Watts-Lay, Director, WEALTH at work, looks at the scale of the problem of pension scamming and whether there may be a greater risk of it now as people grapple with the cost of living crisis. He also outlines what can be done to help the situation.
“Our research with the Pensions Management Institute shows that a staggering 92% of Trustees expressed that they have fears that members approaching retirement will be targeted by scammers.
Unfortunately, scamming people out of their pension savings is a problem that has been around for some time. However, the strain on household finances caused by the cost of living crisis could be seen as a window of opportunity for fraudsters, meaning that some people are more vulnerable than ever. In fact, almost a quarter (22%) of UK adults reported being approached by scammers offering free pension advice or a free pension review, investment opportunities, or a tax refund between March and May 2022.
The Pension Scams Action Group (made up of The Pensions Regulator, Financial Conduct Authority and the Money and Pensions Service) have also echoed concerns over recent headlines that squeezed household finances may leave pension savers more vulnerable to scammers, as it may prompt them to incorrectly decide there is a risk to their retirement pots and result in rushed financial decisions. However, the Group is yet to see any evidence of an increase in pension scam activity, but as we know, many go unreported and it could be some time before we start to see the impact.
In light of these concerns, the Pensions Regulator launched its scam fighting strategy which will build on its pledge to combat pension scams. This includes providing regular scam warnings, encouraging members considering cash drawdown to access guidance services, and carrying out checks and providing warnings on high-risk transfers.
Trustees and employers play a key role in ensuring members make informed choices concerning their pensions. This includes providing financial education and guidance as it can help members understand their options and how scams operate. Scammers can be articulate, with credible websites and testimonials, meaning anyone can be the victim of a pension scam no matter how financially savvy they think they are. In our financial education seminars, we explain how pension scams work and the warning signs to look out for. The rule is, whatever investment someone is planning to make, they should check out the company with the FCA first. If the FCA hasn’t heard of them, individuals will have no place to go if they turn out to be fraudsters.
Financial education also helps members decide if they would like further support such as regulated financial advice, although this is a requirement for anyone looking to transfer a Defined Benefit scheme over the value of £30,000.
Many years of pension savings can be lost in the blink of an eye so it’s time that Trustees and employers do all they can to stop pension scammers in their tracks and put in place robust processes to support and protect members. For those looking at providers for support, carrying out due diligence is crucial. This should include checking that any financial education and guidance providers are workplace specialists with experience in providing support to members. Due diligence on regulated advice firms should cover areas such as; qualifications of advisers, the regulatory record of the firm, compliance processes e.g. compliance checks of 100% of cases, pricing structure, and experience of working with employers and Trustees.”
