Defined benefit (DB) trustees should break the law and refuse transfers when they suspect the customer is being scammed, Margaret Snowdon, chair of the Pensions Administration Standards Association (PASA), has said.
Speaking today at a conference on Sipps in London today, Ms Snowdon said that when trustees “are against a legislation that says the customer can do silly things” they need to face the situation and say "no".
She said: “What is the worst that can happen? Get a fine and slap on the wrist?”
Under the Pension Scheme Act 1993, a after a pension scheme member has requested a transfer it must take place within six months or the provider risks incurring a penalty.
But market watchers have warned those looking to transfer out of their defined benefit pensions - which are often made up of large sums combined with attractive benefits including inflation protection - are rich pickings for scammers.
According to James Walsh, policy lead EU & international at the Pensions and Lifetime Association (PLSA), scammers “are persuasive, confident and sophisticated”.
Michelle Cracknell, chief executive of The Pensions Advisory Service (TPAS), and also a panellist at the conference, said that most of the scams customers complain about even use perfectly legal structures.
She said: “We need to be really weary of the numbers [on scams] coming out which are under reported, because people do not say that they have been scammed and some of these schemes are [seemingly] perfectly legal.”
Ms Snowdon agreed, adding that it is very easy to set up a pension scheme.
She said: “Schemes can look and be legitimate to start with, and change over time.”
The solution, according to Mr Walsh, is to reinvent the registration process.
For small self-administered schemes (Ssas), the law should oblige each scheme to appoint an independent trustee when dealing with a pension transfer.
He said: “That would be more effective than the current solutions that we are seeing.
“Some of the new measures being introduced will simply not work.”
Last month, the government announced new rules aimed to prevent fraud in pensions, which include tougher action to help prevent the transfer of money from legitimate pension schemes into fraudulent ones.
The new rules require trustees to check their receiving scheme is regulated by the Financial Conduct Authority (FCA), or has an active employment link with the individual, or is an authorised master trust.
The new protection measures will also allow HM Revenues & Customs (HMRC) to de-register a pension scheme that has a dormant sponsoring employer.
Ms Snowdon also advocated for a mandatory consultation on the pension transfer process, with TPAS.
She said: “If you can stop a quarter of all scams that would be huge.”
maria.espadinha@ft.com
