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One in three pension schemes hit by scams

One in three pension schemes hit by scams

Nearly one in three pension schemes have been affected by fraud, according to the latest RSM survey. 

Victims have experienced a threefold increase in scams in the last 12 months alone, according to the RSM Pensions Fraud Risk report.

The data revealed that among schemes that had experienced fraud, 51 per cent were victims in the last 12 months, while 17 per cent were scammed between 12 to 24 months ago.

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The survey, which was carried out among 130 scheme trustees, secretaries and pension managers, collectively responsible for more than £50bn of members’ savings, took place between October and November last year.

It revealed a "worrying level of complacency among trustees" with almost 60 per cent of respondents claiming fraud was not a significant threat to their scheme.

A quarter failed to recognise that trustees were responsible for the systems that prevent and detect fraud.

The top fraud experienced by schemes was pensioner existence fraud, where benefits continued to be paid to relatives of deceased pensioners.

According to RSM, the growing trend for those aged 55 plus retiring overseas is making it more challenging for schemes and their administrators to keep up with any changes to circumstances and although families have a responsibility to report a pensioner’s death, evidence suggests this is not always carried out.

More than a third of victims highlighted pension liberation fraud.

Schemes and administrators have experienced an increase in suspicious member transfer requests since the introduction of new pensions freedoms introduced in April 2015.

Despite this, RSM pointed out trustees’ hands are tied as even if fraudulent activity is suspected, they are legally unable to block transfer requests.

In this scenario, the only option they have is to ensure members have the necessary guidance and information to reach a confident decision, which means more fraudsters are getting away with duping vulnerable scheme members.

Figures reported in the recent Autumn Statement showed almost £19m was lost to pension scams in the year to the end of March 2016.

Ian Bell, head of pensions at RSM, said: "Fraud prevention has to be championed at the top but there is evidence from this survey that trustees are failing to take ownership of the issue.

"In fact, when a quarter of respondents don’t even know that fraud prevention and detection is their responsibility then you know there is a problem.

"Trustee boards must actively consider fraud risk on at least an annual basis and make sure that risk registers are kept updated.

"They must also be alert to new and emerging threats and ensure there is a robust fraud risk policy in place with appropriate control measures.

"Generally speaking, there needs to be a much greater recognition of the scale of the fraud problem and a much greater urgency and will to tackle it."

ruth.gillbe@ft.com