Pension scams take many forms and are constantly evolving. The scammers have greed and time on their hands to plan new ways to attack hard-saved pension funds. In theory, pensions should be one of the hardest sources of funds for scammers to get their hands on, but this hasn’t deterred them and I can’t see that changing anytime soon. Pension pots are often the largest savings pot a person will accrue during their lifetime, so it is very appealing to scammers even if only a few are taken in by them each time.
Pension freedoms threats
Pension freedoms are great for many, but the ability to access the whole pot gives the scammers another opportunity to get their hands on victim’s monies. There is no advice requirement to access the funds, although providers will deliver additional risk warnings to those accessing funds without advice. These warnings are unlikely to be sufficient if the promises made by scammers have been believed by the client.
The pension freedoms won’t be the only change in legislation that brings additional risks to clients; new threats are appearing every year. Simply put, it means the industry has to constantly try to outwit the scammers and educate consumers on the risks.
Rules not guidance
One area that has been the bane of providers is monitoring and vetting the investments that clients and advisers want to make into pensions. This was made worse by the removal of the permitted investment list and all of the providers were left to decide what they wanted to accept within the taxable property rules. Not only does this create an uneven playing field, it gives the scammers a way to tempt clients away from reputable providers by offering investments that sound more exciting, but may well result in the loss of the whole fund and even a tax charge at the end of it.
Unlike many, I would welcome more rules and regulations, because guidance is always open to interpretation, which means variations among providers. This can lead to those that are looking for weaknesses being able to target different companies in different ways, methods that can help them avoid detection.
Not just up to the regulators
The regulators do great work, but in many cases they are on the back foot and chasing down scammers after someone has been scammed. It is difficult to get in front of the scammers as they are always looking for new ways to get around obstacles.
Scammers may also be better resourced than the regulator, which has many areas to cover and can’t monitor all schemes all the time. This is why it is down to all of us to be on our guard to try and protect end consumers. This shouldn’t be a barrier to business.
There have been cases where transfers have been restricted to perfectly legitimate providers because the scheme is new, even though the provider is well known and well respected. Sensible precautions should always be adopted, but common sense should prevail.
The blame game
Small self-administered schemes (Ssas) have taken a lot of the blame for scams. Yes, they have been used as a vehicle for prospective scammers over the years, but they aren’t the only problem and we shouldn’t become complacent in other areas.