Most people are aware of the dangers of scammers, yet according to FCA and TPR, over 50% of members don’t think they would fall for a scam. They really believe they would spot something dodgy if it was offered to them. In 2018, according to Royal London, £34bn was transferred out of DB pension schemes. Given that roughly 50% of transfers requested proceed to settlement, that means more than £60bn of transfers were either asked for or offered automatically. Because of the prevalence of red flags spotted by administrators – PSIG research suggests somewhere between 0.5% and 12% of transfers examined show signs of a scams – we can say with some degree of confidence that well north of 10,000 people made transfers in 2018 that they will regret later.
It is not easy to protect people from scams, but we are expected to do it. The Pensions Regulator and the Pensions Ombudsman make it clear that trustees should try to detect scams and warn members about the dangers of scams. The PSIG Scams Code, sets out very clear steps for schemes to take to give a very good chance of spotting a scam. However, seeing signs that a transfer could be a scam and refusing to make that transfer are two very different things. The law as it stands, doesn’t really allow for scams in the way they operate today.
However, we expect a change in the law in future to limit the statutory right to transfer to certain schemes and to require an earnings link to the employer behind an occupational pension scheme. But 95% of transfers today go to SIPPS, not to occupational pension schemes and personal pension schemes only need to be registered. This is not good enough if we want to be able to protect our scheme members and not fear a future compensation claim.
Being a trustee is a position of responsibility and trust and trustees should have the power to refuse a dodgy transfer on the grounds that due diligence throws up recognised red flags. If we don’t protect our members from scammers today, we will find this working against us tomorrow.
Scammers are very smart, and they disguise themselves and their offerings very well. The industry needs to constantly keep up with them. Some organisations spend a lot of time and money looking out for scams and talk to members about the areas of concern, but some do very little, relying on the law alone for protection.
At PSIG, we produce the Scams Code and update it as often as we can. We also run a forum where currently more than 40 organisations are able to share intelligence on potential scams, so that all can be warned. Through our work, administrators and providers stop many millions of pounds getting into scammers hands every year.
2020 will be a key year for PSIG, a sort of coming of age. We already punch well above our weight and achieve things that larger organisations dream of. However, we need to have more structure and reach and will be considering what shape that takes. We will also be looking at some new measures to help the industry further, including an online intelligence sharing tool that allows even more organisations to share and benefit from collecting factual information on possible scams. This tool will also inform the regulators about operators of concern to help them target their limited resources. We also want to introduce training for administrators and trustees in how to carry out good due diligence. We also plan to introduce a kitemark for schemes that carry out good due diligence, so that scammers are forewarned that the administrator will be looking closely and will spot them if they entice members to transfer. We are also looking to collaborate with overseas regulators as this problem is not just in the UK.
All this takes money. PSIG currently has none and everything we do is on our own time, so next year we will build a business case for proper resourcing and funding. We all need to do our bit to protect members – if we don’t, we will all face huge financial consequences down the line.
Margaret Snowdon OBE, Chair of PSIG
