Pension scheme fraud has doubled in the last two years, pointing to worrying complacency among trustees, administrators and pension managers.
According to accounts and audit firm RSM’s 2015 RSM pensions fraud risk report, one in seven over-55s have been targeted by pension fraudsters since the pension freedoms kicked in, with almost 70 per cent offered a ‘free’ pensions review.
Twenty-four per cent of scams involving offering to invest pension savings did not explain the new products, while in more than a quarter of frauds involved, people were offered an ‘exotic’ investment scheme promising attractive levels of return.
Schemes with more than 10,000 members are more susceptible to fraud, with half of victims from larger schemes, this despite the fact that only 26 per cent of respondents overall are from the largest schemes.
Third party-administered schemes reported a higher proportion, 53 per cent, of fraud, while schemes managed in-house accounted for 35 per cent of fraud victims, while schemes overseen by both internal and third-party managers account for 12 per cent.
|Fact & figures|
24% of scams did not explain new pension product
27% involved ‘exotic’ high-returns investment schemes
37% of pension schemes experienced fraud in 2015, compared to 17% in 2013
40% of schemes have not tested internal controls within the past 12 months
The report said all the reported frauds in the survey in the past 12 months were around member transactions, with transfers and other member transactions accounting for over three-quarters of the frauds reported by the largest schemes of over 10,000 members. The company said the size of the schemes made them more susceptible. Fraud was also reported in member data.
Jonathan Rowley, director and IFA at Sheffield-based Hamnett Wealth Management: “Insurance companies have been complicit where they have allowed a scheme or brand to do pension transfers and offer cashback to below-55s, incentivising them.
“The overseas schemes are the most dangerous, with people offering immediate cashback, getting people to do transfers to offshore havens and charging massive fees. You would hope pension providers would not allow this.”
Steven Cameron, regulator strategy director at Aegon, said: “The pension freedoms have provided great opportunities for many customers but unfortunately also for fraudsters. Our own research indicates 19 per cent of people have received a cold call offering a free pension review or pension investment opportunity.
“Fraudsters are always on the lookout for new opportunities and the introduction of new terminology and processes can be confusing for consumers who won’t necessarily spot the warning signs. Our message is always that if it sounds too good to be true, then it probably is.”