Jail terms alone won’t keep savers safe from scammers

The substantial jail terms secured against two fraudsters show how TPR and the courts will take tough action against pension scammers.

The sentencing of Alan Barratt and Susan Dalton after they admitted charges of fraud by abuse of position arising from their roles as pension scheme trustees highlights our commitment to pursue scammers and protect savers.

But tough prison sentences alone aren’t enough to dissuade all scammers and secure savers’ pension pots.

And that’s where we need the pension industry’s help. Dalton and Barratt’s crimes took place between 2012 and 2014, but there’s much we can do today to keep savers safe from scams.

First, we need trustees to make use of new powers to block transfers they suspect are scams and second, to report any suspected scams to the appropriate authorities.

Our recognition of the potential power industry holds in stopping scams is why we launched our Pledge to Combat Pension Scams campaign.

And I’m particularly interested in seeing how the pensions industry can follow the banking industry’s lead in developing innovative ways to scupper scammers.

Evolving threat

As well as the Pledge, changes to transfer regulations last November further bolstered saver protections, giving trustees the power to refuse transfers where there’s a heightened risk it may be part of a scam. We expect trustees to take a risk-based approach to decisions and refer to our guidance on dealing with transfer requests.

But we are not complacent. We know scammers’ methods will continue to evolve which is why we have worked with The National Fraud Intelligence Bureau to jointly review the threat of pension scams and I want to share some of the most important themes from that work so we can all play our part in stopping the scourge of scammers.

Pension-related investment scams

Barratt and Dalton were part of a criminal enterprise encouraging savers to transfer money from legitimate occupational pension schemes into scam schemes.

Today, our threat assessment suggests retirement savings are becoming increasingly vulnerable to the wider increase in investment scams.

Here scammers may gain access to a saver’s pension pot through the offer of an investment opportunity that could yield a higher return. The saver may be persuaded to transfer their pot to another pension product, such as a SIPP, or invest cash legitimately withdrawn from their pension under pension freedoms.

Once the money is handed over the scammer often cuts off all contact and disappears with the cash or an excuse is made as to why the funds were lost as part of the investment.

We need industry’s help in ensuring pension savers are made aware of the potential risks from investment scammers.

High fees and unsuitable advice

As well as out and out criminality, our intelligence also suggests savers’ money can be at risk from high fees and unsuitable advice.

Our threat assessment found concerns about high fees and unsuitable advice were often linked to the increasing transfer requests to international self-invested personal pensions (SIPPs), which look to facilitate investment overseas but through a UK-registered SIPP.

Our investigations show those seeking these transfers frequently live overseas with the transfer facilitated by intermediaries and advisers outside the UK.

Here we’ve heard evidence that these overseas intermediaries “coach” the saver through the transfer process convincing them it is in their interest when, in reality, they may be exposed to high or unnecessary charges. This coaching can be successful in getting the saver to continue with the transfer even when they’ve received regulated advice advising they should not transfer.

Toxic relationships

Effective communications are still key to scammers, who remain keen to build up a relationship with their targets. Scammers will often try to build a rapport with their potential victim hoping to lull them into a false sense of security.

Our intelligence shows they make use of variety of methods for establishing and maintaining contact with their victims, including phone, pension review websites, investment comparison websites, email, social media platforms and advertisements.

Likely thanks to the ban on pension cold calling, this has become a less relevant method of initiating contact with victims, however the telephone is still a significant tool for progressing the scam.

Industry’s role

Scams will continue to change, but the devastation these kinds of crimes have on their victims will not.

We may not be able to stop all scams, but we need the resources and reach of the pensions industry to help us prevent more scams. With a united effort between agencies such as TPR and industry, we can help stop more people suffer the way Barratt and Dalton’s victims have.

Barratt and Dalton’s victim’s numbered in the hundreds and together they lost £13.7 million – worth about £55,000 on average.

And the harm wasn’t financial alone. At the pair’s sentencing, the court heard how many of their victims also suffered psychological harm because of Barratt and Dalton.

Some face the prospect of having to work longer than they expected while others don’t expect to be able to retire at all.

To help avoid more stories like this we need more pension providers, trustees and administrators to sign up to our Pledge campaign.

I encourage everyone in the industry to get to know the warning signs of a pension scam. They should regularly warn members about the risk of scams. And we want to see trustees of defined contribution schemes following our guidance on meeting new duties to offer to book Pension Wise appointments for members.

Reporting

Importantly, schemes should report concerns about scams to the authorities.

While not every report results in an investigation, all reports help build a clearer picture and help us disrupt fraudsters making it harder for them to operate. It’s also important to remember that if an investigation is open it is unlikely agencies will be able to comment on them for legal reasons but that is not an indication that nothing is being done.

The pension industry is best placed to recognise signs of a scam and has the power to act. I urge everyone in the industry not to sit on suspicions but help protect savers by reporting concerns.