The government has begun to take action on pension scammers, but an uncertain timeline has left the industry asking what more can be done. Simoney Kyriakou reports
Pension scams and their originators can be as tricky to pin down as the actual roots of the word scam itself. The word entered the lexicon in the 1960s, but beyond that its origins are unknown.
Victims of scams end up feeling lost themselves – too often when a fraud has been identified, it is too late to save their cash. According to figures from the City of London Police, £42m had been lost from pension pots to scams within just two years of the 2014 Budget, when then chancellor George Osborne announced the pensions freedom and choice regime.
This August, the Serious Fraud Office warned of yet another investment scam involving storage units, which has taken £120m out of people’s savings, including their pensions. But those who operate elaborate schemes that are designed to defraud people of their pension pots may find it tougher to do so now the UK government is bringing in new laws.
This summer, the government announced a ban on cold-calling, giving powers to HM Revenue & Customs (HMRC) to prevent potentially fraudulent pension schemes from being opened and taking action to prevent transfers from genuine occupational schemes to fake schemes.
Under the new rules, which are set to be finalised this year, the government wants to ensure only active companies that produce regular up-to-date accounts can register pension schemes. According to government statistics, an estimated 250 million cold calls each year offer the public free pensions reviews or incentives to release pension funds early.
Therefore, incorporating texts and emails into the cold-calling ban, and imposing hefty fines of up to £500,000 for those that flout the rules, will go some way towards cracking down on scams.
But the point at which these rules will be reinforced is still uncertain. In the meantime, people are still falling victim to cold-calling, texting and those oh-so-promising and professional looking websites.
Helen Morrissey, personal finance specialist at Royal London, explains: “Government figures show almost £5m was taken by pension scammers in the first five months of 2017 alone and, given the under-reporting of scam activity, this is likely to only be a small proportion of the true amount of money taken.
“The ban needs to happen as a matter of urgency alongside an awareness campaign to let people know that firms should not be contacting them in this way.”
There have always been fraudsters and thieves, but pensions freedoms, which came into force in April 2015, have made it easier for scammers to prey on the unwary.
Philip Brown, head of policy at LV, comments: “The pension freedoms are fundamentally beneficial for people, giving them welcome control and flexibility over their retirement savings. However, these reforms have also increased the risk of retirees being targeted by scammers.”