The government should legislate to give pension companies and regulators greater powers to help prevent fraud and protect savers.
This should include the ability to stop transfers they believe are fraudulent, even if customers wish to proceed. These were the conclusions of research from The People’s Pension and the Police Foundation in response to increased scam activity in the wake of the Covid crisis.
The research found that from 13 providers alone, almost a thousand customers with combined savings of £54 million were targeted by scammers last year.
Although pension providers are currently able to flag potential fraudulent activity to customers, neither they nor The Pensions Regulator are able to stop transfers — a key reason why two thirds of the 938 customers, still transferred £31 million worth of funds despite the risk.
The People’s Pension and The Police Foundation are calling on the Government to give pension companies the power to trigger an urgent regulatory response to savers at risk of fraud, enable regulators to override the statutory right to transfer should a suspected scam be reported to them, and ensure victims of pension fraud are not hit with additional tax penalties as is currently the case.
The People’s Pension director of policy Phil Brown says: “Pension savings make up a huge proportion of personal wealth in Britain, with around £2.5 trillion accessible to scammers.
“For those people who fall victim to fraud, it can be devastating; many people lose their life savings and are hit with the double whammy of still having to pay tax penalties. For some people, they’re forced to sell their homes, while others have sadly taken their own lives as a result.
“Currently, pension providers can flag a potential scam to a customer, but we can only stand by and watch if the individual chooses to proceed with a risky transfer that could result in them losing all their savings.
“We’re calling on the Government to provide pension providers and regulators with the powers to stop risky transfers and ensure victims of fraud aren’t hit with having to pay tax penalties on their lost savings.”
The report also calls for a broader definition of pension fraud to ensure crime data provides an accurate picture of the issue with a central database set up to ensure a more systematic collection and analysis of intelligence, and recommends police investigators are supported by specialist fraud victim support services such as that provided by the National Economic Crime Victim Care Unit, to help manage, assess and support vulnerable victims of fraud, and facilitate engagement with the criminal investigation.
Police Foundation director Rick Muir adds: “We can’t arrest our way out of pension and investment fraud and that’s why efforts at the front end to prevent scams are so important.
“Nonetheless, in terms of financial losses and overall wellbeing pension scams are among the most harmful types of fraud and it is therefore vital that they are taken seriously by law enforcement.”