Pension companies must be given the power to trigger an “urgent regulatory response” to savers at risk of fraud, while regulators should be able to override the right to transfer, The People’s Pension and The Police Foundation have said.
Savers' pension pots are more vulnerable since the introduction of the pension freedoms, while £54m of combined savings were targeted by scammers at 13 providers last year alone, the pair said today (7 September).
In Protecting people's pensions: understanding and preventing pension scams, they warned that while providers are able to flag potentially fraudulent activity to customers, neither they nor The Pensions Regulator (TPR) can act to permanently stop transfers. This has led to round £31m of funds transferred despite the risk.
In addition to the greater powers for schemes and regulators, the report urged for the government to amend the law to ensure victims of pension fraud are not with tax penalties. Savers who access their pension before the age of 55 via scams are landed with high tax bills from HM Revenue and Customs.
Writing for Professional Pensions, The People's Pension director of policy and external affairs Phil Brown urged for a more unified and specialist response to scams from all relevant stakeholders.
He wrote: "It is paramount that the government gives TPR the power to halt a transfer if a suspected fraud has been reported to it by a provider, although members of schemes should also have the right to carry out any bona fide transfer and have the right to appeal to The Pensions Ombudsman."
Brown also agitated for a far broader definition of pension fraud, as well as the establishment of a central database, to ensure a "more systematic collection and analysis of intelligence".
"Now is the time for policymakers and law enforcement bodies, together with the industry, to take clear and decisive action to prevent criminals from ruining the lives of even more pension savers."
The Police Foundation director Rick Muir added: "We can't arrest our way out of pension and investment fraud and that's why efforts at the front end to prevent scams are so important. Nonetheless, in terms of financial losses and overall wellbeing, pension scams are among the most harmful types of fraud and it is therefore vital that they are taken seriously by law enforcement."
The report comes as the Work and Pensions Committee (WPC) continues a three-part inquiry into the impact of the introduction of the pension freedoms, with the first tranche including pension scams as a central focus. The committee has called on victims of pensions fraud to respond to the call for input.
Last month, TPR and the Financial Conduct Authority refreshed their joint ScamSmart campaign, highlighting that £30.8m had been lost to scammers in the last three years and employing football commentator Clive Tyldesley to raise awareness of the danger of making transfers without due diligence.
A TPR spokesperson welcomed the report for "highlighting the hardship caused by pension scammers and its focus on protecting savers' retirement funds from criminals".
They added: "Pension scams devastate lives. On average a victim loses £82,000. Once that money's gone, it can be gone forever.
"TPR and its Project Bloom partners are dedicated to stopping scammers. We are working together to tackle scammers head on, using our powers to investigate and prosecute. We will continue to bring scammers to justice.
"But we also know education is one of our best weapons in that battle. Anyone can be a target, which is why it's vital all savers should be ScamSmart, know the common signs of a scam and always check who they are dealing with."
Law enforcement, financial regulators and the private sector need to do much more and work together to protect savers from fraudsters, says Phil Brown.
The former trustee and chief executive officer of Yateley Industries for the Disabled has been ordered to pay back £250,000 he stole from the charity’s pension scheme.
The former trustee of a charity who defrauded a pension fund of £250,000 will appear in court today (4 September), one year after The Pensions Regulator (TPR) said it would seek a confiscation order for the funds’ return.
Chris Edwards-Earl and Stephen Richards offer some tips for those finding themselves under TPR's microscope.
Jonathan Stapleton says the Pension Schemes Bill is the latest in a long line of well-meaning legislation that makes it more difficult for employers to offer good schemes to their staff