The issue of pension scams isn’t new, but it is growing and constantly evolving. The wheels of motion to combat the scammers have been slow off the start line, though are starting to pick up speed.
The cold-calling ban is now in place, although getting there was a long, drawn-out process. Welcome though it is, many would agree it does not go far enough in today’s world, as it doesn’t cover social media, email or ‘factory-gating’.
What we do have now, though, is a Work and Pensions Select Committee looking specifically at the issue of pension scams, and new powers to be introduced as part of the Pension Schemes Bill.
What do we mean by ‘pension scam’ though? Historically, the main focus has been on pensions being transferred to ‘dodgy’ schemes. The transfer model is certainly the focus of the changes in the Pension Schemes Bill and changes proposed in the latest Commons debate include allowing trustees to press ‘pause’ in the transfer process where there are red flags. This would be a welcome introduction.
But pension scams can involve much more than just transfers. Since the advent of pension freedoms, anyone over 55 can withdraw their entire pension fund. If someone is persuaded behind the scenes to make the withdrawal and hand over funds to the scammer, then is this a pension scam? The scammer has almost certainly targeted the pension as a source of funds – but the ‘dodgy investment’ is not within a pension wrapper. We also see investment fraud within pensions – where it is the investment that is dodgy, not the pension itself. (Clearly this is where due diligence on the part of the pension provider is crucial.)
The Work and Pensions Select Committee has an ongoing inquiry into pension scams in the pension freedom world. As AJ Bell pointed out when giving oral evidence to the committee, we need to look at the bigger picture. Yes, look at the scams involving transfers, but also look at investment scams too, and what people do with funds withdrawn from pensions. If we’re serious about combating this, should we have a ‘Minister for Scam Prevention’ with responsibility for tackling the issue?
For as long as we have pensions, there will be pension scams – what is most people’s biggest asset (property aside) will always be too tempting a target for those with less-than-honourable intentions. But if we can have that Lamborghini chasing down the scammers rather than a Robin Reliant, we may have a better chance of sticking to the road and being on their tails.
This article was previously published by Sipps Professional
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