More than six-in-10 people who received red flags about their pension transfers in 2019 disregarded the warning and proceeded anyway, a report by The Police Foundation has revealed.
The UK think tank found that 13 pension companies identified that 938 customers were targeted by scammers last year. Their combined savings totalled £54m ($70m, €60m).
Of those, 62% insisted on going ahead despite the scam warnings, meaning that around £31m could have been potentially lost to criminals.
Data from 10 of the 13 firms found that they processed 425,244 transfers in 2019. The total value of pension transfers made last year neared £16bn, the Police Foundation said.
Recent statistics from XPS Pensions Group backs up the report’s findings, as it showed that, in September 2020, 62% of pension transfers triggered scam red flags.
‘Truly alarming’
Tommy Burns, risk and financial crime manager at Phoenix Group and deputy chair of the Pension Scams Industry Group (PSIG), said: “It’s essential that the recommendations contained within the Police Foundation Report, which the PSIG and Phoenix helped develop, are taken forward by government.
“In particular, the report shines a light on the potential scale of pension scams and highlights that this is well in excess of the figures reported to Action Fraud. It also illustrates that the statutory right to transfer continues to see money transferred even when warning signs of a scam have been identified.
“Some 60% of pension scheme members are still insisting on a transfer even when the transferring scheme has warned them that they may be being scammed. This is a truly alarming percentage.
“From the 13 firms who provided data to the Police Foundation survey, just under £31m was transferred to schemes suspected of being linked to a scam in spite of such warnings.
“If this experience is replicated across the industry – and there is no reason to conclude that it would not be – the amount of money lost will be staggering.”
Changing the law
As a result, many are lobbying the UK government to amend the Pension Scheme Bill to allow pension scheme trustees the power to halt a transfer when red flags regarding scam activity are raised.
Under current rules, scheme members’ statutory right to transfer doesn’t allow any trustee intervention if the pension holder is set on transferring out.
Burns continued: “The amendment to the Pension Schemes Bill, which was developed by PSIG and the Phoenix Group and which will be tabled in the House of Commons by Stephen Timms, chair of the Work & Pensions Committee, would remove this right to transfer when sufficient scam concerns were identified giving pension scheme trustees the ability to refuse to transfer.
“It would provide a key defence against the scammers.”
Concerns
While the amendment would try to prevent retirees from falling victim to fraudsters, some industry players have expressed doubt on the move.
International Adviser previously reported that concerns about consumers being scammed do not stop at the transfer itself.
This is because once a scheme member transfers out of their DB pension – which most often than not goes into a Sipp or similar product – they can access their pot without any financial advice, meaning they would still be at risk of becoming a target for fraudsters to exploit.
