It is still a little too early to assess exactly what the impact has been, but its fair to expect the number of transfers where a definitive red flag will be identified will be relatively low. In my view, we are likely to see far more MoneyHelper referrals than actual refusals. Such a referral is required if a transfer has exhibited one of the seven amber flags where the warning sign is present but has required a more subjective assessment of the potential for concern. A positive impact will only be seen if pension scheme members value the safeguarding appointment and take action as a result of the information they receive. 

What we need to understand going forward is if the guidance making members stop to think and deciding either not to transfer at all or, alternatively, to transfer to one of the many safe destinations which the pensions industry provides. The regulations are not intended in any way to prohibit or restrict transfers to such destinations.

To assess the effectiveness of the regulations and to inform their formal submission to parliament in 18 months’ time, DWP have engaged with industry to try to capture very detailed management information (MI). We need to be clear though - irrespective of what this MI tells us - the problem of pension scams will not be solved. As the recent Treasury Select Committee report on Economic Crime highlights, there is no “silver bullet” available.

In this regard, it is important to reflect on what we mean by a pension scam. The definition of a pension scam endorsed by the Work & Pensions Committee in their Pension Scams Inquiry report includes:

“The marketing of products and arrangements and successful or unsuccessful attempts by a party (the “scammer”) to:

•               persuade individuals over the normal minimum pension age to flexibly access their pension savings in order to invest in inappropriate investments

where the scammer has misled the individual about the nature of, or risks attached to, the purported investment(s), or their appropriateness for that individual investor.”

The new statutory regulations have no bearing on this aspect as it relates to financial scams perpetrated directly on the pension scheme member once they have received their tax-free cash payment or withdrawn funds under a drawdown facility. It is not a pension transfer scam but it is a pension scam as it is the proceeds of the pension which are being lost. There is no transferring scheme to offer the protection of due diligence checks. Even if the transfer regulations make pension transfer scams that much more difficult, the scammers won’t just quietly go away quietly. Many will simply turn their attentions to the lower hanging fruit of investment scams on the members’ own funds. Many fall victim to brand impersonation scams where fraudsters mimic or “clone” genuine firms websites and typically offer investments at realistic rates of return to tempt savers into buying “genuine” investment products (usually some form of bond) with them. Payment is, of course, made to the bank account controlled by the fraudster rather than to the genuine firm.

To enable industry, our regulators and law enforcement to understand what how pension scams are evolving and to more clearly understand the impact of measures taken to combat the issue, we need to better distinguish between:

·      early access pension scams (pension liberation)

·      pension transfer scams

·      pension scams on the proceeds of a member’s pension fund. 

Such a distinction and reporting alignment should enable a much clearer picture of the scale and nature of the problem to be established. In essence, rather than require industry to report every pension scam as pension liberation fraud (as is the case currently), reporting should be aligned to the three separate types of scam.

We need to make sure that reporting to law enforcement is focused and provides meaningful data but Government do need to make it so much easier for industry to report their concerns. At the moment, pension scam reporting can be to Action Fraud, the National Crime Agency (NCA) and Police Scotland as well as to both the Pensions Regulator and to the Financial Conduct Authority (FCA). This cannot be an effective use of resources and we must look to rationalise industry reporting so that it is done once and once only and then disseminated as required.