Pension schemes could be hit with more fraud claims

Pension schemes could be hit with more fraud claims

Pension schemes that have failed to detect a scam could be hit with more ombudsman complaints as more cases of this type make their way through the system, industry experts have warned.

Several experts warned pension schemes would be seeing more fraud-related claims in the near future, as it often takes years for victims of fraud to realise that all their savings have been stolen.

The warning comes after the Portsmouth City Council lost its case with the Pensions Ombudsman after it failed to stop a pension transfer to a scam.

A number of pension schemes have been hit with compensation claims in recent years after they allowed pension transfers into scams because of their lack of due diligence.

In these claims the individual is often a victim of pension scammers. However, in many cases the ombudsman has found that the ceding scheme was in the wrong as it hadn’t carried out proper due diligence checks before agreeing to transfer into the fraudulent receiving scheme.

Tom Selby, senior analyst at AJ Bell, said: “Action in recent years to ban pension cold-calling, coupled with greater regulatory scrutiny and public awareness initiatives, hopefully mark the beginning of a fightback against retirement fraudsters. 

“It can take years for those who have been victims of fraud to realise they have been caught out, so it would be no surprise to see more of these cases filter through the system."

An added problem is the variety of approaches providers have to carrying out due diligence, which is partly the result of disputes over who should have the final say in a transfer.

Mr Selby highlighted a case from 2016 where a High Court judge ruled in favour of a clients’ right to transfer her pension into a new scheme despite her existing provider’s concerns about it.

He said: “The Royal London case certainly didn’t help providers looking to block transfers to suspect schemes at the time.

"The reality is the statutory right to transfer created a significant tension and different schemes have interpreted due diligence requirements in different ways.

“This has not been helped by a lack of clarity from regulators on exactly what due diligence checks need to be carried out, resulting in a varied approach across the industry.

“A clear statement from the various regulatory bodies involved on the roles and responsibilities of providers in relation to due diligence would go a long way to bringing about greater certainty for members and the wider retirement market.”

Margaret Snowdon, chairwoman of the Pension Scams Industry Group, also believes that more of these cases will hit the industry soon.

Ms Snowdon said: “I believe more cases are already coming to light, especially with claim management companies seeing an opportunity.

“It is inevitable that the Pension Ombudsman’s workload will increase.”

In the latest case of this kind the Pensions Ombudsman found that the Portsmouth City Council pension scheme didn’t carry out proper due diligence before transferring the claimant's pension to a fraudulent scheme.