Margaret Snowdon says while there has been progress on tackling scams, particularly on cold calling, trustees are not out of the woods yet
In January 2019, we got the long-awaited and very welcome ban on cold calling aimed at reducing the millions of unsolicited calls being made to persuade unwitting members to undertake a free pensions review, with many people falling for the tactics. Recent research by the Pensions Scams Industry Group (PSIG) showed in 2018, only 6% of transfers came from a cold call, a startlingly low statistic. Of course, it is possible some people genuinely forget they have been cold called. It is also likely they don't know what a cold call is or are groomed by the scammers to deny it and therefore aren't identifying it as such. The most likely, however, is the massive decline in cold calls is probably down to sophisticated scammers wising up to the ban, which was well trailed, and changing tactics before the ban came into force and adapting the tools in their armoury using techniques such as advertising, social media, emails and factory-gating to target members.
Trustees often ask how much investigation they need to do before paying out a transfer. Some recent Pensions Ombudsman cases have shown the importance of due diligence and how trustees need to carry out the right amount of checking and due diligence. Trustees in one case were found to have fallen far short in investigating a transfer request before settling and were instructed to reinstate the member in the scheme. This is a significant development, but very specific to the circumstances. In another case, the trustees delayed a transfer to a clearly bona fide scheme and were found against by the ombudsman. The code has been mentioned as a good basis, so we would encourage trustees and administrators to follow it as far as possible. It is not necessary to follow it slavishly, but trustees ought to ask their administrators to demonstrate that their due diligence processes tie in with the principles of the scams code.
Administrators, to their credit, carry out a lot of checks and our research showed how much effort goes into protecting members, sometimes from themselves, with cases taking between 30 minutes for a straightforward transfer to over 10 hours for a complex one. Trustees should be supporting their administrators to carry out this important function, not only as it follows their own requirement to act prudently and undertake best practice but also to protect the scheme alongside the member.
The code is currently being updated to reflect the cold calling ban and will be published mid-April. It has also been updated to give a bit more detail on international SIPPs. PSIG research revealed that 95% of transfers go to SIPPs. I was recently asked by a trustee why I thought this was a concern. Transferring to a SIPP is not a concern in and of itself and is in fact a perfectly reasonable option. However, I would not expect 95% to need the flexible investments of a SIPP, as opposed to a personal pension. The sad truth is many SIPPs and especially so-called "international SIPPs" have been targeted at UK and ex-pat scheme members, whether suitable or not. One concern about some SIPPs is they are set up with layers of fees that deplete the funds, and often members are unaware. They also often contain risky investments, again not understood by members.
Another development is the rise of ambulance chasers following the ‘Mr N' Pensions Ombudsman case. Having seen one reinstatement, some companies are offering to help those who have transferred out since 2013 get compensation or reinstatement from their ceding scheme. It is unclear whether they have any convincing arguments, but with billions transferred, we expect the Ombudsman to be busy over the next few years. In the meantime, we urge schemes to exercise caution if approached by such companies for compensation claims and to rebuff them swiftly.
Margaret Snowdon is chairwoman of the Pensions Scams Industry Group
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