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How can the industry tackle growing pension scam threat?

Savers are facing a new wave of increasingly sophisticated attacks from criminals looking to access their pension savings as experts warn the challenge of detecting and stopping frauds is getting harder.

A Citizens Advice poll this week found most consumers are unable to spot the warning signs of pension scams.

In a survey of 2,006 British adults, Populus offered three hypothetical pension offers, of which two contained clear warnings of scams.

The test saw 90 per cent of consumers choosing an offer which contained red flags such as offers of free “advice” and access to savings before 55.

This comes despite three-quarters of respondents saying they felt confident of their ability to spot scams.

Of those who said they were confident, 87 per cent chose one of the fraudulent offers.

The latest figures from City of London police, obtained by Money Marketing,  show an increasing tendency for pension liberation fraudsters to strike less frequently, and target larger sums.

Although the most recent 12 months of police data show just over a third of the number of cases reported compared with the previous 12 months, the amount of cash taken from savers has increased.

While the year to February 2015 saw £10.5m of frauds reported, the following 12 months saw £13.2m of scams reported to the police, despite the fact these sums were generated by 640 cases, rather than 1,883 cases in the previous 12 months.

But with all sides warning fraudsters are changing their tactics, what can be done to combat this  mutating threat?

Dodgy investments

Aviva head of policy John Lawson says the tumbling numbers of liberation fraud cases reflect the increasing popularity of investment scams based around pension freedoms.

Figures from the Association of British Insurers show £5.9bn has been taken from pensions – either through drawdown or cash lump-sums – in the first nine months of the reforms.

Lawson says: “I would be astonished if a few of those weren’t scams because one of the big problems with freedom and choice is it doesn’t need to be pension liberation to rob people.

“You can just push people to take their money out of a pension and give it to you to invest directly in biofuels or car parks or whatever your wacky investment happens to be. Some of those might be real, but some will just be flat-out Ponzi schemes. There’s a real need for the authorities to try and crack down on those fake investments, but also to look at whether leaving unregulated investments unregulated is a wise thing to do.”

“One of the big problems with freedom and choice is it doesn’t need to be a pension liberation to rob people”

Citizens Advice says its research shows recent months have seen increasing numbers of offers of  “reviews” or “advice”. Some 8.4 million people are estimated to have received unsolicited offers of advice or a review in the last year.

These tend to involve providing free services in a bid to gather information or authority to transfer a pension, and act as a lead for subsequent pension investment scams, with “advice” most commonly offered to those aged 55 to 64 and a “review” to those aged 45 to 54.

Citizens Advice chief executive Gillian Guy says: “Fraudsters have shifted their tactics to rob people of a retirement income.

“Scammers are increasingly offering consumers free pension ‘advice’ and reviews to get their foot in the door before they try and trick people out of their savings.

“It’s difficult for consumers to stay ahead of pension scams as they evolve.

“Many scammers use professional looking websites and leaflets to fool their victims into signing  up to free pensions advice or cold call with offers of unusually high investment returns.”


Citizens Advice has drafted recommendations to help improve awareness of scams, and to stop fraudsters earlier, including an expanded role for the FCA’s ScamSmart portal.

But independent consultant Alan Higham warns the depth and sophistication of some scams makes detecting the legitimacy of operations – particularly where unregulated investments are involved – difficult.

“If more fraudsters are seriously taking to impersonating firms, then that makes it more difficult for those who can’t necessarily do the research, like those abroad in particular.

“But we could cut this dramatically if we just banned cold-calling altogether and made it simpler to tell which firms are registered and which firms are not.

“Currently the FCA register is not clear and it’s difficult to navigate. I can’t really see any benefit to allowing cold-calling while there is an increasing number of people who suffer hugely from these frauds.”

Game changer

At the same time, providers are forecasting an uptick in liberation fraud in the aftermath of a February High Court ruling against Royal London, which sought to block an £8,000 transfer.

The judgment overturned a Pensions Ombudsman decision which sided with Royal London over a 2014 transfer to a SSAS.

Royal London business development manager Fiona Tait says: “It’s too early to tell if that increase will follow, but there were a number of cases that were pending that decision. As long as the law remains as it is, that will make it easier for the liberators if they choose to go down that route. Certainly we have a duty to point out all the dangers to our customers, but if these things are to be blocked, then we need an independent statutory body to say when that is possible.”

AJ Bell technical resources manager Gareth James says his firm is already seeing signs of increased attempts of liberation activity, in particular in numbers of requests for pensions transfers that had previously been rejected.

“The Royal London case is a game changer. We have seen cases where transfers that had previously been raised and where there had been questions, have come back with requests for that transfer to be re-assessed. That would indicate they were aware they weren’t going to win the battle before, but are more likely to win the battle now.”

Case studies

High losses

Paul wanted to begin accessing one of his pensions but was told to do this he needed to transfer his pension to another company. He looked on the internet and found a new company that would give him access to his pension and transferred the money to them. However, Paul later discovered the company was not registered with the FCA and he is now unable to contact them. Paul has tried ringing, writing letters and even visiting in person, but they are no longer at the address he was given when he transferred his money. In total, Paul transferred over £62,500 of his pension.

Unsolicited text offer

John, 54, received an unsolicited text message from a pension provider based in Prague offering him the opportunity to maximise his pension. John responded and was pressured to transfer his pension into a pension fund in Malta, and offers were made for a courier to collect his application form. John approached his local Citizens Advice as he was struggling with the application form and wanted support to complete it. It was at this point he was made aware the pension offer was a scam.

Unreliable informal checks

Richard, 59, has a number of pension pots with a total value of around £50,000. He was cold-called by a company offering him a “free pension review”. Richard felt the company was genuine as there seemed to be a lot of office background noise. On the phone, the company carried out the review and asked him lots of questions about his pensions. From this, they suggested he make the most of his pension pots by investing them in Hong Kong. He was offered an appointment the next day to go through this in more detail and told a courier would bring round documents for him to sign. Richard checked the company’s website to see if they were genuine and felt it looked legitimate.

However, when the courier visited his house Richard realised this was similar to a scam he had been the victim of in the past and so refused to sign the documents and cancelled his appointment. Although Richard did not lose any money, he is very worried he had provided the company with personal details such as his National Insurance number. Richard continues to receive frequent calls from the company pressuring him to agree to a meeting.

Source: Citizens Advice



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There are 9 comments at the moment, we would love to hear your opinion too.

  1. You may as well ask how do we protect idiots.

  2. Douglas Baillie 31st March 2016 at 10:53 am

    It is time that the FCA started to investigate non-authorised advisers and then prosecute them.

  3. Non-authorised advisers (acting as introducers) and marketing companies are a big problem – they all play very close to the law and are often how some people end up in dodgy investments I have found personally. Just dig below the surface of the FSCS payouts with SIPP advisers. The pattern is very clear and always the same.

    The way to tackle this issue I feel is social media. All the law enforcement agencies use them these days even the National crime agency. It may cost but the reach does work.

    There is another issue around this that is not covered. Since pension freedoms have arrived along with the sometime lacking guidance from the regulators and advisers have to constantly watch their back for fear of being accused of mis-advising /misselling, small IFAs have been turning client away who we consider high risk to their business. Quite rightly. This is becoming a breeding ground for the scams as people who want access to their pension funds will do so with little thought to the risks. At the moment the evidence is only anecdotal but it is growing.

    On a final thought we used to report the scams to the FCA. We dont bother as nothing ever happened even though we told them they were breaking the law and have example. We actually had a case where a guy was duped by a pensioneer trustee out of £20,000. We tried the pensions regulators, FCA, Police as the evidence was that clear. In the end we had to report to the ‘Action Fraud’ which essentially is nothing more than a government quango collecting statistics. Nothing has happened and that was 2 years ago.

  4. For the second time in two days I have to agree 100% with Harry. If people are too stupid not to invest a small amount for qualified independent advice before parting with their money then it is their fault, no one else’s.

  5. Stuart Rathbone 31st March 2016 at 12:30 pm

    As I said on FT adviser, the constant litany of stories like this remind me of;


    “It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.” (“The Common Law of Business Balance”, widely attributed to John Ruskin 1819-1900).

    Said differently;

    “The law exists to stop the honest man being made a fool not to protect fools from their actions”.

    It is time for the multi-various government agencies, quasi government agencies and apparatchiks who have grown up around the FS industry to step up to the plate and start telling it like it is to the investing public. I.e. the regulated industry is safe, and while it is not cheep (as nothing of quality is) has high standards of qualifications and you money will as safe as it can be. One other point they need START PROMOTING IT AS OPPOSED THE DENEGRATING AND BLAMING IT AT EVERY TURN.

    In my opinion failure to do this should lead one to question the motives of the state machine.

  6. Apart from providers, who will get castigated for imposing ‘barriers’, I’m not sure why the industry should be bothered.

    People who fall foul of these scams usually don’t want to pay for independent financial advice, having been fed a diet of ‘advisers are bad’ in the tabloid press, so why should we bother?

  7. Fools and their money are easily parted. ‘Twas ever thus and forever will be. Consider the case of John, 54, who received an unsolicited text message from a “pension provider” based in Prague (??) offering him the opportunity to maximise his pension by transferring its value to a scheme in Malta (??). For heaven’s sake ~ (almost) anyone who falls for that (as he did) deserves no sympathy whatsoever. And tackling the problem certainly isn’t the responsibility of honest, regulated advisers. What are the providers doing to stop people transferring their pension (or any other) funds to unauthorised schemes, particularly overseas ones? Do they not check the bona fides of the proposed receiving scheme? It’s simple enough (I would have thought).

    Enclosed with a share dividend notice I recently received was an FCA leaflet entitled Be ScamSmart (code EQUCIVICZ), “In association with the Institute of Chartered Secretaries and Administrators Registrars Group”. It’s very good, I’m happy to acknowledge ~ clear, concise and easy to understand. I wonder, though, (seriously) why no corresponding leaflets are (or have yet to be) issued with any of the periodic statements I receive on my investments and pension plan.

  8. Greg Heath, makes a very valid point, “IFA’s turning clients away as they consider it to risky”, now we have to, or some-one has to realize, how the hell has a environment been created that the good among us will not do, and the bad will do ?

    I think the vast majority of advisers know the simple answer to this, its a pity that the FCA won’t converse, sorry that’s wrong, they will converse but choose to ignore…. every-one know’s best, apart from the people who know the most about said subject

  9. Anthony Fallon 1st April 2016 at 2:06 pm

    Why are the Government and FCA choosing to continue to ignore this on-going SCAM activity ?

    Why do all sensible Advisers have to put up with this on-going fiasco ? This hits us all with bad publicity and financially through higher FSCS fees.

    If someone wants to transfer pension benefits to an overseas scheme, the transfer can only be sent to a scheme which is on the Government’s Recognised Overseas Pension Scheme (ROPS). HMRC only allow schemes which meet certain criteria and they go on to say “Sometimes the list is updated at short notice to temporarily remove schemes while reviews are carried out, for example, where fraudulent activity is suspected.”

    If there was a list created of Recognised UK Pension Scheme (RUPS ?), then Providers would only allow transfers to schemes recognised on the list. At least there would be some kind of order brought to the current chaos. ( Does this sound like pro-active Regulation ? – Do we ever get this from FCA or do we have to wait again until hundreds of horses have bolted ? )

    Where is the FCA – are they doing anything to resolve this problem ?

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