The Work and Pensions Committee has launched an inquiry into the impact of pension freedoms and level of protection for pension savers.
Launched today (July 28) the three-stage “broad inquiry” will investigate how savers are protected as they move from saving for retirement to using their pension savings under freedom rules.
The inquiry will first focus on pension scams before moving on to accessing pension savings and saving for later life, with a call for evidence expected to be published next year.
Pension freedoms were introduced in 2015 with the aim of giving people aged over 55 more control over how and when they can access their savings.
But due to this level of flexibility scams have boomed, leading the former chief executive of the Financial Conduct Authority to admit earlier this year the regulator has been playing catch up since the reforms.
The coronavirus pandemic and ongoing financial hardship as a result of lockdown had provided an extra opportunity for fraudsters to target vulnerable savers and those looking to their pensions to provide additional financial support.
Stephen Timms, chairman of the WPC, said: “We know reported frauds could be just the tip of the iceberg, so the committee is keen to better understand the scale of the pension scam problem, as well as the types of scams in operation and the role of the pensions industry and public bodies in using current powers against fraudsters.
“We also want to know what more can be done to prevent such scams, to halt the huge and devastating impact they have on those looking for security in later life.”
To inform its inquiry, the committee has urged people across the industry to provide their views on the following questions:
- What is the prevalence of pension scams?
- What are the current trends in pension scams?
- What are the common outcomes of pension scams for perpetrators and victims?
- How are existing enforcement tools being used?
- What more can be done to prevent pension scammers operating?
- What more can be done to prevent individuals becoming victims of pension scams?
- What role should the pensions industry have in preventing scams?
- Is HMRC’s position on the tax treatment of pension scam victims correct?
- Are public bodies co-ordinating the response to pension scams?
The Transparency Task Force had previously made a formal request that the WPC launch an inquiry into the extent of scams and an all-party parliamentary group on pension scams is expected to launch in September, with the backing of a number of MPs and others in the pensions industry.
Andy Agathangelou, founder of Transparency Task Force, said: ”The pension scams pandemic that is blighting so many pension savers in the UK, is a festering sore on the face of the pensions industry that desperately needs treating.
“The WPC is uniquely placed to make serious headway in an area that has challenged the authorities and regulators for many years."
He added: “Without a doubt, today’s news gives pension scam victims hope: hope that reforms will be made to make it hard for innocent people to have their pension savings stolen from them; hope that callous criminals will be brought to justice; and hope that all the authorities can become properly aligned and form a united front to defend the Great British public.”
Adviser’s pay the price
One way victims of such scams look to recover their money is by claiming against unscrupulous firms via the Financial Services Compensation Scheme, which in turn is funded by the regulated industry.