Defined Benefit  

Changes in DB communication needed to curb scams

Changes in DB communication needed to curb scams

Trustees must improve their communication with advisers and savers if they want to put a stop to pension scams, advisers have warned.

Dominic James Murray, CEO and independent financial adviser at Cameron James, said trustees need to be more accessible to savers to get them to engage with their pensions.

This in turn would assure they understood their savings and were in a better place to turn down unsolicited approaches by scammers.

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Research from the Pension Protection Fund found only half of DB scheme members were engaged with their pensions and of the 2,000 members polled, a third were concerned about not having enough to live on in retirement.

Scammers often trick savers into parting with their money by convincing them their savings will not suffice for a comfortable retirement.

The PPF found a worrying lack of knowledge about several aspects of DB schemes, including how much they award in retirement, and whether savers had to be working for their employer at the time of retirement in order to receive their DB pension.

The PPF also highlighted a general lack of engagement with DB pensions, with 58 per cent of respondents unconcerned about keeping in touch with their scheme administrator, rising to 76 per cent among over-55s.

Murray said the biggest issue with DB schemes was the lack of access to the scheme trustees.

"Even as qualified professionals with 10 years' experience in DB schemes, we find [trustees] extremely difficult to communicate with," he said.

"Many DB schemes hide behind faceless 'portals' and remove contact telephone numbers. Within 15-20 working day turn around times for basic information like late retirement factors."

He said schemes needed to employ more admin and customer service staff as a start.

"This could significantly reduce the number of clients being susceptible to pension scams as they know more about the value of their DB benefits," Murray said.

The PPF found 60 per cent of 35–54 year-olds had considered transferring out of their scheme due to concerns of a high profile insolvency but 75 per cent did not know that their pension was protected by the PPF.

Sara Protheroe, chief customer officer at the PPF, said: “It’s extremely worrying that so many people with DB pensions are unaware of the valuable protection available to them if their employer failed, and this may result in inappropriate DB transfers.

“It’s also concerning that one in three people are concerned about not having enough to live on in retirement, yet fewer than half know how to find out how much their DB pension scheme is worth, particularly when our research also revealed misunderstandings around how much a DB pension typically pays.” 

Those looking to transfer out of their DB scheme are particularly vulnerable to bad advice of scams.

In November, rules came into force which removed people's statutory right to transfer in suspected scam cases, giving trustees the right to block transfers if certain ‘red flags’ are present, such as individuals being pressured to transfer, or if they have questions around the receiving scheme.