Take action to stop pension scammers in their tracks
Pension scams are a persistent problem that have a devastating impact on those who become victims.
Research by Wealth at Work with the Pensions Management Institute shows that 92% of trustees said they feared members approaching retirement will be targeted by scammers.
The strain on household finances caused by the cost of living crisis could mean that some members are more vulnerable than ever this year. With almost a quarter (22%) of UK adults having reported being approached by scammers offering free pension advice or a free pension review, investment opportunities, or a tax refund between March and May this year, it’s clear that fears are well founded.
DB pensions at risk
Defined benefit (DB) pension transfers are a particular area of concern, and the XPS Pension Group reported an all-time high in July of 97% of transfer cases as having one or more scam warning sign. Indeed, most (86%) of the trustees in our survey have concerns over this. It’s unclear yet if the measures put in place to enable trustees and scheme managers to block or pause suspicious transfers have helped the situation.
The Pensions Regulator (TPR) recently launched a new scam-fighting strategy in light of concerns that the cost-of-living crisis may leave savers more vulnerable to scammers.
The strategy will build on the TPR’s pledge to combat pension scams which includes providing regular scam warnings, encouraging members considering cash drawdown to access guidance services, to carrying out checks and provide warnings on high-risk transfers.
Trustees and employers play a key role in ensuring members make informed choices over their pensions. This includes providing financial education and guidance as it can help members understand their options and what ‘red flags’ to look out for.
It can also help them to decide if they would like further support such as regulated financial advice, although this of course is a requirement for anyone looking to transfer a DB scheme over the value of £30,000.
Providing education and guidance
Our survey also found that half of trustees provide financial education (50%) and almost half (48.5%) of Trustees provide or facilitate financial guidance for members at retirement.
There have been marginal improvements from 2021’s survey (49% provided financial education and 46% provided financial guidance), but this is no where near the levels that we should be seeing considering the concerns being reported by Trustees.
However, nearly two out of five (39%) trustees are facilitating regulated financial advice for their members. Encouragingly, this has seen a 9 percentage point increase from 30% since the survey was last carried out in 2021.
It’s time that trustees and employers do all they can to stop pension scammers in their tracks and put in place robust processes to support and protect members. For those looking at providers for support, carrying out due diligence on them is crucial.
Carry out due diligence
This should include checking that any financial education and guidance providers are workplace specialists with experience in providing support to members. This can help members understand key issues at retirement such as tax implications, risks around DB transfers and how to spot a pension scam.
Due diligence on regulated advice firms should cover areas such as; qualifications of advisers, the regulatory record of the firm, compliance process eg compliance checks of 100% of cases, pricing structure and experience of working with employers and trustees.
This now needs to be about striving for good member outcomes and not minimal compliance, as many years of pension savings can be lost in the blink of an eye.
The survey was conducted by WEALTH at work and Pensions Management Institute You can see the full report at www.wealthatwork.co.uk
In partnership with WEALTH at work
WEALTH at work is a leading financial wellbeing and retirement specialist - helping those in the workplace to improve their financial future.
