Nearly one in five pension schemes in the UK have suffered fraud in the past 2 years, Baker Tilly's Pensions Fraud Risk survey 2012 reveals. This is an alarming rise of 55% on the same period last year.

In the survey, 12% of respondents said their scheme had suffered fraud within the last two years. This year, the figure jumped to 19% of respondents reporting fraud over the same period.

Larger schemes (10,000+ members) appeared to be the most vulnerable, accounting for 70% of frauds reported in the Baker Tilly report.

This, however, could be interpreted in two ways: either larger schemes, having more members and being more complex, are exposed to greater fraud risks; or they are simply better at spotting fraud due to stricter governance frameworks.

A higher proportion of fraud reporting also seems to occur in those schemes which are administered in-house. In the last 12 months, 18% of the UK in-house schemes have reported a fraud. This compares to only 12% of schemes administered by a third party and 14% of scheme overseen by a combination of internal and external managers.

"We have to remember that these figures are only talking about fraud that has been detected and reported," says Ian Bell, head of pensions at Baker Tilly. "Much more fraud is likely to be going on that simply isn't detected or that has been detected but not reported."

Baker Tilly's report shows that the area most vulnerable to fraud is the accuracy of member data. Rated on a scale of 1-5 (low risk to high risk), inaccurate member data scored an average 3.08 rating across the survey. In the past few years progress has been made in introducing tighter checks on member data, but the survey results suggest more action is still needed.

azeevalkink@wilmington.co.uk      

First published 20.06.2012