Financial scams will not stop unless the industry and the public are given the right education on what to spot, according to Angie Brooks, chief executive of Pension Life Administration.
Speaking on a Pensions Playpen webinar yesterday (January 30), Brooks discussed her work of bringing civil and criminal cases against advisers and life offices for mis-sold or fraudulently-sold pensions and investments.
She explained how the introduction of the pension scams action group (formerly Project Bloom) in 2013 - created to warn pension scheme members of what to look out for if they are targeted - caused fraudsters to move away from pension liberation to more investment focused scams.
“This knocked a big hole in the pension liberation because opportunities for scammers drastically slowed but actually the money to be made was never from the liberation but from the investments,” she said.
Brooks highlighted that scammers found they could make a lot more money by targeting ‘better quality victims’ that had more money to invest.
She added: “It makes much more economic sense for a scammer to ignore the liberation aspect all together and just go for the idea that someone could get guaranteed returns of whatever number the scammer can think of to increase the overall appeal of the investment.”
An example of this was Blackmore Bond, set up in 2016 and, until 2018, ran an investment scheme where potential clients were offered mini-bonds with an attractive level of interest.
The company raised millions of pounds from investors to fund property developments, but fell into administration in April 2020 after several months of rocky waters in which it failed to pay interest due to bondholders.
Some 2,000 investors were deprived of £46mn, much of which was never recovered.
Brooks said that some scammers are also trying to appeal to people through the ESG aspect by suggesting that the investments they will be making are ‘ethical’.
She also highlighted that once she began to investigate fraudulent schemes she soon realised many were intertwined.
“It’s like leapfrog, you start with one scheme and then you find one person or one asset is involved in something else. Before you know it, I went from working on the £27mn Ark scheme in 2013 to now working on £360mn worth of various schemes,” she said.
Due to the lack of sanctions placed upon fraudsters, Brooks said this is what allows them to continue setting up new scams.
Financial scams education
The only way forward is to provide education to both the public and pension ceding providers on what red flags to look out for, according to Brooks.
A ceding provider is a pension scheme member's existing provider, from whom the member wishes to transfer their pension pot.
She said: “Ceding providers need to understand what to look out for and spot the red flags. I feel that pension administrators ask too many questions but the wrong ones, they need to be educated.”
One guest on the webinar added: “We need to get spectacularly better at spotting the good from the bad.”
Brooks also said that seeding providers needed to do more due diligence when it comes to pension transfers.
“If you ask the correct questions, the answers are always there and this will make it easier to spot a scammer, so it's important to do some due diligence,” she said.
Simon Chrystal, chief executive of WPS Advisory, said it was important to get more consumers engaged and to raise public awareness of scams.
He said: “People are sometimes scared of pensions because they don’t understand them and scammers use this to their advantage. So it's about engaging with consumers because the best way to stop it is to not let it happen in the first place.”
Brooks added she would like to see more funding put into stopping financial scams and improving education around it.
She said: “Going to the government and seeing if we can get a grant, to help educate the regulators, the public and the industry is really the only way forward.”
alina.khan@ft.com
