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How do we protect people from themselves?

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Kim Gubler looks at the way pension scams are evolving and discusses how the pensions industry can do more to protect their members.

Have you ever bought something from eBay thinking you’ve got yourself the best bargain ever? Then when it arrives, you realise it’s either half the size you thought it was. Or even worse, it’s such poor quality you’re never going to be able to use it. I’m guessing most of us have done it at some point – I know I have! A (small) comfort with an eBay purchase is, it’s unlikely to have a lasting impact on your life – and, it’s rarely a crime.  But what about people who’ve been offered higher returns on their pension than they can ever expect from their current pension provider? The old adage – if something looks to good to be true – it usually is, runs true here and it’s probably a scam. Whether they lose all their pension savings, or whether their money is so depleted by charges or failure to produce returns. In the end, its real people who suffer.

Last year, Margaret Snowdon, PASA’s President and Chair of the Pension Scams Industry Group led the production of version 2.0 of Combating Pensions Scams: A Code of Good Practice. This document went a long way to setting out practical steps for people involved in running pension schemes to protect their members from scams. Also, in 2018 legislation was brought in to ban cold calling. Both positive developments. Yet administrators are reporting little difference in the amount of transfer requests they receive[1]. Some even questioned the validity of linking the introduction of the cold calling ban to any reduction in transfer requests. But I think that’s missing the point. People are still being scammed, often those whose only retirement savings are wrapped up in a pension. They are the least able to afford any loss and yet they are still losing everything. 

The news recently talked of two people who’ve potentially lost all their retirement savings after believing the spiel of a door to door salesman[2]. He offered to double their money if they kept it invested in a German property redevelopment company for at least five years. So far, nothing has materialised from this unregulated investment. Those affected hope the company will come good on its promise. Only time will tell if they get any money back, but experts are dubious.   

According to the BBC, 84,000 bank customers lost money through what’s called Authorised Push Payment Fraud (APPF).[3] People generally receive emails, branded to look as if they’re from a known and legitimate source, usually there’s an invoice attached. The problem is, these social engineering techniques are so convincing, and money is gone before people realise there’s a problem. It’s made easier for the criminals with Faster Payments, where money is transferred in less than two hours. The banks used to refuse any responsibility for losses. But now eight banks (17 ‘bank names’) have signed up to a voluntary code. They’ve agreed a process to determine legitimate claims and issue full refunds. Where neither the bank, nor the customer are at fault, refunds will come from a central pot established by the big banks and will be available to all signatories. 

Doesn’t it make you think pension scammers are just like these APPFs? A lot of vulnerable people are convinced to transfer their hard-earned pension savings – often never to see it again. Wouldn’t it be good if pension savers were protected in the same way as bank customers?  

Scammers come in all shapes and sizes. They knock on doors and promise the moon, they call you because they have your contact details from PPI, they call you from abroad – they land in your inbox. Would you recognise a scammer if you didn’t work in the pensions industry?

Kim Gubler PASA Chair

[1] KGC 10th Administration Survey 2019