A number of pension schemes are being investigated for their suspected links to cold-calling and pension scams.
The Pensions Regulator (TPR) and police have launched an investigation into schemes they believe could be aiding introducers in getting hold of pension cash and putting it into high risk unregulated investments.
The watchdog believes the pensioners were being offered the promise of higher returns and cash incentives before transferring their funds.
The regulator has already appointed an independent trustee to run the Alderley Wealth Management pension scheme over concerns about the management of more than £3m of funds.
The watchdog said there was evidence some members had requested their funds to be invested in low-risk UK based investments when funds were instead placed in high-risk and illiquid investments overseas.
Mike Birch, director of case management at The Pensions Regulator, said: "Cold-calling pension holders isn't illegal yet, but no reputable business does it.
"We would urge anyone to contact Action Fraud if they are phoned and offered the chance to transfer their pension.
"Our message is simple – a cold-call about your pension is an attempt to steal your savings."
A joint operation between The Pensions Regulator and the North East Regional Special Operations Unit (NERSOU) involved search warrants being executed at four homes and businesses in Newcastle, Sunderland and West Bridgford, near Nottingham, on 11 January.
The Pensions Regulator teams also inspected one business in the north east in connection with the investigation, before serving a Section 72 notice requiring information from that business under the Pensions Act.
One man and one woman have been interviewed by police on suspicion of Fraud Act offences, while a second man has been arrested and questioned by police on suspicion of fraud.
He has been released while the investigation continues.
Ben Fairhead, a partner at international law firm Pinsent Masons, said: "It is good to see The Pensions Regulator continuing with a proactive approach in tackling perpetrators of pension scams.
"However, there are limits to what can be done after pension funds are lost to a scam – the fraudsters will make it as difficult as possible to trace and recover assets.
"The fundamental message to take away is a need for greater public awareness to discourage individuals from transferring their pension funds into scams in the first place.
"It is taking a long while to bring in a cold calling ban but, pending one being implemented, the message needs to be rammed home that an approach initiated by a cold call or the offer of a free pension review is very likely not going to end well.
"A proper advertising campaign or soap opera storyline would be a good way of aiding that."
Pensions scams have rocketed since the pension freedoms were introduced in April 2015.
The Financial Conduct Authority warned savers in March last year to be vigilant about scam investment deals after it found the over-55 demographic was the most vulnerable to pension scammers because of their pension pots.
The government is in the process of banning pension cold-calls as part of its Financial Guidance and Claims Bill.
It said in a letter to the Work & Pensions select committee published in February it would speed up the introduction of the ban by putting forward its own amendment to the bill.
But Stephen Lloyd, the Liberal Democrat spokesman for work and pensions, said the government's proposal in its current form would prove "virtually worthless" unless major changes are made to it.
He said the ban did not provide extra protection for those who use the Telephone Preference Service (TPS), or for those who receive unsolicited text messages, or calls from automatic dialler machines.
Mr Lloyd said: "These proposals have been heavily watered down from the original amendments in the Lords and no longer go far enough.
"As they stand they are now virtually meaningless in terms of protecting pensioners from scammers. Those who are really intent on committing fraud will not be put off by this bill, which is the politics of half measures."
Paul Stocks, financial services director at Dobson and Hodge, said he had been targeted via text message a few years ago and was offered cash up front and 8 per cent a year thereafter.
Despite this happening after the Retail Distribution Review, which banned commission-based charging on retail investments, Mr Stocks was told the fund would pay upfront commission, of which he would receive 75 per cent, representing 15 to 20 per cent of the fund value.
He said the issue was unregulated people were abusing regulatory loopholes.
He said: "Assuming a Sipp or perhaps Ssas is used, it would appear that underlying investments can still pay commission from within a UK regulated environment.
"I have also seen very high charging funds being offered, or funds with exit penalties – again, surely the charges must be disclosed but the implication is that they aren't and therefore the regulation again needs to be enforced."
Mr Stocks called on the FCA to introduce standard disclosure in terms of advice, permissions and charges to prevent firms from drafting their own disclosure, "leaving room for poetic license".
He said: "More regulation isn't necessarily the answer. Most of the issues I have seen are due to current regulation being ignored or not followed. It is therefore the appropriate enforcement that is required in the short term."
carmen.reichman@ft.com
