Five Years on from the Pension Freedoms: Pension Scams

Summary:

1. Which? welcomes the opportunity to submit written evidence to this inquiry into pension scams. This submission identifies three key themes: the prevalence and trends of pension scams amongst consumers; the different types of pension scams and how to mitigate them using lessons from the broader scams landscape; and what more industry and government can do to prevent pension scams.
2. Pension scams cause considerable detriment to victims, many of whom are vulnerable. They can cost people their life savings, and leave people facing retirement with limited income, and little or no opportunity to build their pension savings back up.
3. Pension scams are often too narrowly defined by industry and policymakers, which can further reduce our understanding of the issues involved in pension scams. With more than half of pension pots that are accessed being withdrawn fully into cash, often then keeping their savings in a current account or savings account, this can leave people vulnerable to losing large sums of money to a whole range of scams such as romance scams and impersonation scams. Better reporting of data on pension scams could lead to a better understanding of its causes, and could also lead to an improvement in how the industry treats victims of these scams.
4. Regarding the prevention of scams, we understand that scammers often cold call people via phone, email or text. They also often advertise online and can have websites that look official or government-backed. There are different enablers involved in the scam depending on which contact route the scammer chooses to take. We believe that it is critical that the different enablers of scams take steps to protect consumers, because it is not reasonable to expect consumers to be able to protect themselves from such sophisticated scams. We supported the Government’s decision to introduce a cold-calling ban on pensions, however more needs to be done to ensure that consumers are protected from scams that result from cold calls, texts and online advertising.
5. Which? believes that the pensions industry, regulators, government agencies and law enforcement can and should do more to detect potential scams and to work together to prevent them. There is also a significant need to increase the take-up of advice and guidance to ensure that people are better informed in their decision making. We propose that the pension industry should be required, and enabled, to take on greater responsibility for vetting pension transfers and pension liberation requests, and alerting law enforcement and regulators. In cases where pension schemes identify a significant risk of a scam, the members should be required to take regulated advice with regards to the transfer. To help ensure individuals can access this advice, for these limited circumstances the advice could be funded by a levy on industry. HMRC, the FCA and TPR should also work together to develop a stronger regime of authorisation and monitoring of pension schemes and providers.