PSIG was five years old this year and what a time it’s been! We published our first Scams Code in March 2015 and began our journey to change the Pension Scams landscape. Our objective when we started was simple, to be redundant within a few years with scams a thing of the past. Sadly, that was not to be, and scammers have kept us busy. We have formed a scams intelligence network which shares intelligence with the multi-agency Project Bloom as well as helping the bigger providers to identify scammers. We are planning the fourth update to our Scams Code for later this year, and we already know we will need to update it yet again next year. We are of course relieved that we have been able to stop countless scams, but sadly so many people have still had their lives wrecked. The wicked don’t rest, so we won’t either.
2015 also brought the introduction of Pension Freedoms, we warned that the changes would have an impact on scams, and we weren’t wrong. Over the years, the demand for transfers has escalated, partly driven by inflated CETVs, but largely by the lure of easy access to pension monies.
Over the years, scams changed from pension liberation, to true pension scams, then to investment related scams. Growing demands for access to funds following hardship due to the pandemic could see us back full circle to pension liberation. The common theme is always the same though, members lose out and scammers win. Coronavirus has shown us just how quickly scammers move to capitalise on change. The ingenuity and the speed of getting millions to transfer money to coronavirus scams is astonishing. The pensions industry can’t hope to respond as quickly, but we need to work together to protect members more than we do.
We need an anti-scams movement because later life matters. Too many people still think they’d never fall for a scam and too many schemes are afraid to protect members from scammers. The results is £billions taken out of DB schemes and never seen again.
We all know what we need to do, but we don’t always do it. There are two aspects to this. Firstly, trustees need to be on the right side of the law; so does the Pensions Ombudsman. So, from the outset our hands are tied, while the scammers are not. The law permitting transfers is too strong, so rather than break it we need to change it. Easier said than done. PSIG has been trying for four years to get a law change to stop scammers, and only now do we see a chink in the armour!
It costs a lot to protect people from their own folly; without putting ourselves in harm’s way. The only way we can do it is by gently nudging and persuading. We need to talk to members so that they can decide for themselves that the dodgy transfer is indeed dodgy. This takes time and money and too many people think it’s not their job. It is all our jobs, unless we want to see further £billions of pensions money lining the pockets of scammers.
Secondly, we need to help pension scam victims. They are not the enemy, although the potential rise in claims for past transfers won’t help. Victims – the ones who know they are victims that is - are really squeezed at both ends. They fall for a scammer’s patter (just like 50% of us would) and lose their savings. Claims management companies and so-called support groups of all shapes and sizes, hover around to help victims recover the lost money. And charge fees for doing nothing. We need a campaign against falling for secondary scamming. Yes! it is a thing. As if primary scamming wasn’t enough, we can throw secondary in for good measure. Unfortunately, once a DB transfer has gone, it can’t be reversed and if a scam, the scammer has disappeared with little chance of the victim recovering anything, or even getting the satisfaction of prosecution.
Then, delivering the unkindest cut of all, the tax man has to apply the law too and levy a tax penalty on the poor victim, if they were lucky enough to get any money out of the transfer. Victims who haven’t been found guilty of anything are having to pay a tax bill they cannot afford. Squeezed front, back and sideways! The financial and health consequences of being a scam victim are huge.
What can we do about it? More than you might think….
1. Treat it as a duty to carry out proper due diligence on anything other than a “white” transfer, ie one you know and you’ve transferred to before with no problems. The Code sets out the steps for good due diligence.
2. Talk to members who you believe are about to make the biggest mistake of their lives. I know the law is likely to say you ought to make the transfer anyway, but counsel (not advise!) members first before you simply shrug and execute the request.
3. Be very careful in responding to claims management requests for information about a transfer. You may not need to provide as much as they ask for and if the request is complex, you may have three months to reply.
4. Write to your MP and ask them to support the proposed PSIG tax law amendment, currently sitting on the Chancellor’s, and others’, desks, which would give HMRC the flexibility to not charge a tax penalty on pre 2014 pension scams victims.
We really should not underestimate the potentially dire consequences of scamming. Aside from the massive financial implications, you are also talking about quality of life and mental health. It is no exaggeration to say you could save a life, as well as a pension.
Margaret Snowdon, OBE, Chair of PSIG
