Consultancy firm XPS Pensions Group has seen a rise in the number of its clients reporting scam activity on members’ pension transfers to 34% in June 2019, from 13% a year ago.
XPS provides advisory services to over 1,000 pension schemes and undertakes pension administration for over 870,000 members.
This rise in scam activity reporting related to £73m ($93m, €82m) of members’ pension savings that were at risk over the past 12 months.
The firm has identified the following issues that were discovered when talking directly to a pension fund member:
- Lack of awareness around fees;
- Confusion around the IFA process; and
- Misunderstanding the transfer process.
Wayne Segers, principal at XPS Pensions Group said: “Over the last year we have seen a big increase in the number of warning signs being identified of potential scam activity around pension transfers, from one-in-eight in June 2018 to one-in-three in June 2019.
“Fortunately, not all turn out to be scams but it is good to see an increased understanding of the warning signs. Our scam identification team identified the red flag warnings by speaking directly to members, which is a key part of the data gathering process.”
In the last 12 months to 31 May 2019, XPS’s scam identification team have handled 969 member pension transfer cases, representing transfer values totalling £214m.
Crackdown
Earlier this year, a ban on pensions cold calling was introduced, bringing in tougher rules to stop scammers promoting fraudulent pension schemes.
Good communication starts by knowing who to turn to in the case of suspecting suspicious activity, for members this includes:
- Their own pension scheme administrators;
- ScamSmart website;
- Money and Pensions Service; and
- Citizens Advice Bureau.
Segers added: “Pension schemes need a system to identify scam activity, such as our specialist telephone service, however it is also important that schemes help their members better understand their pension entitlements and the fees that they could expect to incur.
“This will reduce the opportunities for scammers to trick them.”
Changes
Recently, the Pension Scams Industry Group (PSIG) has updated its voluntary code of practice to reflect the regulatory changes that have affected the industry over the last year.
Changes to the code in June 2019 are:
- Cold-calling ban;
- TPR and FCA’s ScamSmart campaign and TPR’s threat assessment update;
- The launch of the Money and Pensions Service;
- The Pensions Ombudsman determinations update and implications;
- The rise of claims management firms;
- FCA Letter: Managing the risks of defined benefit to defined contribution transfers;
- FCA, TPR and The Pensions Advisory Service joint protocol;
- PSIG’s scams survey pilot 2018;
- Revised Action Fraud reporting guidance; and
- Additional case studies.
Margaret Snowdon, chair of PSIG, said: “The risk of pension scheme members being scammed increases as they are faced with more choice and the current laws do not help to protect them, in fact they cause further confusion.
“On average, members lose £91,000 of their pension savings through scams which can have a devastating impact on their later life.
“The revised code of good practice published this week is another big step towards helping protect members, but they also need help to help themselves.
“An excellent way to reach them and help prevent the loss of further pension savings to scams is to talk to them directly about their transfers, as the scammers do.
“Scam Awareness Fortnight is a great opportunity to reach out to all members of pension schemes to make them aware of the very real risks from the criminals looking to steal their pension savings.”
