Since then, there have been several developments. HM Treasury has run a short consultation on draft regulations to “ban cold-calling”, expected to come into force before the end of the year. The Pensions Ombudsman has upheld a complaint against the Northumbria Police Authority that it should not have transferred a policeman’s pension. And in a well-coordinated action, The Pensions Regulator has joined forces with the Financial Conduct Authority to re-launch the ScamSmart campaign.

 

Declaring certain activities are illegal and prescribing fines for perpetrators on conviction will not stop people being separated from their pensions. The cold-calling regs will make it harder for scammers, but the potential financial rewards are huge: the latest figures show an average of £91,000 per known victim in 2017. The chicanery will continue; the regs will simply trigger another chicane around the law. 

 

By common consent, it is far better to prevent scams by stifling them at birth, than relying on the law to deter or catch criminals. If the ground is no longer fertile, the seeds will not germinate. Successful prevention then depends upon both individuals and pension trustees and administrators being well-prepared to resist attack by fraudsters.

 

The new ScamSmart advertising campaign is targeting pension holders aged 45-65, the group most at risk of pension scams, calling their attention to the tactics scammers use such as the offer of a ‘free pension review’. People are urged to reject offers coming out of the blue; and otherwise to check who they’re dealing with, resist pressure and seek impartial information and advice before agreeing to anything.

 

There are always at least three parties involved in a pension transfer though – the third being the pension scheme holding the individual’s pension. (There might well be other intermediaries, such as an unregulated introducer.) The Ombudsman found that the Northumbria Police Authority had failed to carry out reasonable checks before transferring the complainant’s pension. It didn’t do “what is needed to carry out what the member requires”, the basis for the statutory discharge of responsibility to provide the benefits, and so it was ordered to reinstate the individual in the Police Pension Scheme.

Besides failing to conduct reasonable checks on the scammer’s scheme, the Authority was judged guilty of maladministration because it failed to send the member a copy of The Pensions Regulator’s scorpion warning, and indeed failed to engage with him about his transfer request at all. It simply processed his request within 24 hours of receiving all the necessary application forms.

 

So here’s a clue to what could be seen as a vital part of due diligence in future: don’t rely purely on documentation, engage with the member – talk, in a word, to him or her, as PASA’s Code recommends. Scammers will be very willing to help victims answer questionnaires, fill in application forms, and provide the assurances that schemes are seeking. A telephone conversation with the member about why they want to transfer and what they know about the proposed new destination could sow doubt and at the same time elicit information that the scheme wouldn’t otherwise get.

 

This might not work, though. Even if the member can be contacted in this way, they might have got a message from the publicity around the cold-calling ban that ‘nobody is going to call you about your pension’ (omitting the ‘cold’) and refuse to talk. Others might be suspicious or even hostile: schemes sponsored by unpopular employers will often be mistrusted. Culture counts; if ‘deferreds’ have only been told the minimum required by the disclosure regulations and regarded by the scheme administrator as a cost to be minimised, they are less likely to feel they have a relationship.

 

Scammers can feed on the potential for mutual disdain here. Schemes, or at least scheme sponsors, can be quite keen to slim down member databases and even encourage deferred members to transfer out, offering enhanced transfer values for example. Defined benefit scheme members seduced by scammers urging them to ‘take control’ can easily succumb to the prospect of a six-figure pension fund. Pension freedom, the zeitgeist since 2015, sounds a lot like pension liberation.

 

From now on pension schemes are going to have to do even more due diligence before they can safely transfer. So must scheme members, though; too many are ruefully admitting they ignored warnings from their scheme administrator and others. There’s a lot of money at stake.

 

 

Ian Neale, Director, Aries Insight