Margaret Snowdon says the industry must be more willing to err on the side of caution as the government's solutions will not stop scammers
We are seeing moves from the government to combat scams, and while the proposed steps might go in the right direction, the time it will take to get there means thousands of people will be cheated out of millions of pounds worth of benefits. This is not right.
We have been railing against scam schemes and bogus investments for years, but more must be done. Right now, the environment is better for scammers than the good guys, with a statutory right to transfers that trumps a bad decision and pension freedoms to give early access to defined contribution benefits. Both of these are great for individual choice, but not so good for the gullible.
Many scams start with an unsolicited approach by a very persuasive scammer, and no matter how foolish we think anyone who gives their pension money to a fraudster, the fact is they do. And if we take the easy route and transfer benefits without question, we will be on the hook to compensate those who lose.
Firstly, we have a potential ban on cold calling and secondly, proposals to limit the statutory right to transfer. While both great solutions that could disrupt scammers, they will not stop it. A ban on cold calling will be limited to pensions and UK contacts, but scammers are already working from overseas and many scams come from secondary introductions, or even introductions from friends and colleagues. Restricting the statutory right to certain types of vehicle will either increase pressure on non-statutory transfers or drive scammers to target those who have already removed their monies from pension schemes. The issues shouldn't stop us putting these protections in place urgently, however - they are way better than what we have.
It is a strange time, with commentators who on one day will call for faster payment of transfers, and the next berate the industry for not doing enough to stop rogues stealing members' pensions!
Scams will eventually lead to pensioner poverty, so we must act now. I don't propose trustees break the law, but we should be more willing to err on the side of caution rather than just say the law forces me to pay this transfer. So what can we do?
- Undertake due diligence on receiving arrangements: This is covered in the Code of Good Practice on combating scams, which has already saved more than £250m, and is being updated for the end of 2017.
- Ask members direct questions: We know the signs of a scam, so we must check reasons for transferring and how the idea came about. Often members will admit they were cold-called, while others will realise at this point that they could be making a foolish mistake, but more often nowadays they are being coached by scammers on what to say if asked. But we still need to ask and we need to ask the member, not the scammer. While cold calling is not illegal and gives us no reason to refuse a transfer, it may cause us to delay while we seek other reassurance.
- The Pensions Advisory Service (TPAS): If there are legitimate concerns and the member thinks we are trying to hold on to their money, ask them to contact TPAS for free, impartial guidance before making an irrevocable decision. This is especially important if a member is vulnerable or does not understand. We want members who were cold-called to change their own minds about transferring, because once the money has gone, the chances of getting it back are small.
- If all else fails: Schemes need a very strong discharge to the effect that the member is aware of the risks and is transferring at his own choice.
With the law so out of touch with reality, we must boldly go to avoid a catastrophe.
Margaret Snowdon is chair of the Pensions Administration Standards Association
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