With pension scams becoming an increasingly common occurrence, we look at what you as employers and Trustees should be doing to raise awareness and prevent further losses.
A pension takes years to build up but can be handed over to a scammer in just minutes. You could compare it to a game of snakes and ladders. You’re gradually climbing the ladder as your contributions grow but if you’re bitten by a snake ‘a scammer’ you could be taken right back to square one. Keeping your pension safe is not a game of chance. As with all savings and investments it needs to be monitored carefully and any decisions need to be made based on trustworthy advice or guidance.
Recent reports on pension scams have confirmed that the average loss for many scam victims is £91,000. That’s a shocking statistic and just goes to show that so far enough has not been done to prevent these frauds. Further details can be found on The Pensions Regulator’s website
Knowing what to look out for
The pension freedoms introduced in 2015 brought in more choice but also more confusion. In order for members to benefit from the new flexibilities they have been told that they may need to transfer their benefits to a new company. Scammers have taken advantage of this and there has been an increase in members being contacted and encouraged to transfer their benefits. Scammers are continuing to adapt and become more sophisticated with their tactics which makes it increasingly easy for anyone to fall victim. You have a responsibility to highlight the risks to members, so they know what to look out for.
Here are just some of the typical ploys used to get members to part with their pension savings:
Cold calls - members are contacted out of the blue offering a free ‘pension review’. This could also be by post or email.
The promise of guaranteed high returns without highlighting the risks.
Investment opportunities that are overseas and described as not being regulated by the Financial Conduct Authority (FCA).
Putting pressure on members to make a quick decision - special one-off or time limited offers.
Claiming that members can start to receive their pension before age 55.
Cold calling is the most common way for scammers to make contact. There were plans by the Government to put in place a ban with effect from June of this year. Unfortunately this was delayed but there is now a new consultation underway.
Four steps to help protect members
The FCA is encouraging all employers, advisers and pension providers to share their campaign resources to help spread the word and prevent more people from falling victim to a pension scam. With The Pensions Regulator, it has launched a new campaign called ‘Scamsmart’ with the intention to stop criminals targeting pension savers. The site includes four steps to help members protect themselves from pension scams. These are:
Step 1 - Rejecting unexpected offers
As with most sales calls members need to remember that if someone calls out of the blue with something that sounds too good to be true, it most likely is.
Step 2 - Checking the details of the person that has made contact
Members need to make sure that the person contacting them is genuine. A good first step is to check if the person offering advice is on the FCA register.
Step 3 - Not being rushed or pressured
A decision shouldn’t be made without taking the time to investigate and fully understand all of the implications.
Step 4 - Getting impartial information or advice
Members should be encouraged to consider seeking financial guidance or advice before making any changes to their pension arrangements.
Pensions scams are an ongoing battle and whilst the scammers are adapting their methods, Trustees and employers need to keep improving and adapting the way they communicate to members - they can’t make the right decision if they don’t know where to go to get help.
To help encourage awareness, the message can be added to regular member communications such as newsletters and benefit statements as well as scheme websites and emails. Short, punchy communications can help to keep it present in a member’s mind when they are reviewing their options or considering offers.
Once a bad decision has been made you can’t roll the dice and undo it. Knowledge and prevention is the key to keeping members benefits safe. For all of us when it comes to saving for our pension we need to climb more ladders and avoid the snakes.