Pension professionals aren’t usually seen as being natural born rebels, particularly those that have worked in the industry for 40-plus years, have sat on the boards of major providers and chaired government and regulatory steering groups and industry bodies.
But Margaret Snowdon, who received an OBE for services to the pension industry in 2010, recently marched on Downing Street, demanding the government does more to protect consumers who fall victim to pension scams.
This ‘Enough is Enough’ campaign perhaps sums up her own attitude towards the powers that be after 10 years at the helm of the Pensions Scams Industry Group — a voluntary body set up to tackle the growing scourge of fraud and scams across the industry.
She says she is completely fed up with the lack of progress that has been made when it comes to tackling pension fraud. “I’ve been battling this for 10 years and getting more and more annoyed by what I see as a negligent and dangerous approach by government.”
Snowdon has nothing but contempt for the criminals who continue to prey on pension savers with ever more sophisticated frauds. But her particular ire is with the way government, HMRC and regulators have dealt with this issue — be it a lacklustre approach to pursuing and prosecuting fraudsters, or the callous way fraud victims are treated by the tax authorities.
“There is an empathy vacuum at HMRC,” she says. “They think the problem is people being greedy, deliberately trying to evade tax. But this isn’t the case at all. These people have been defrauded. But not only do they lose their pensions savings, they end up getting hounded by HMRC over tax bills.”
With many of these frauds a small amount of cash is paid to the individual as a ‘sweetener’. Snowdon says this is the key reason so many people fall for these scams: “They are not trying to dodge tax, or chase unrealistic investment returns. They need the money, and are misled into thinking this a legitimate way to release some of their pension funds.”
Of course it is not, and HMRC typically imposes a punitive 55 per cent tax charge on these unauthorised transactions. This relates to the value of the entire pension, not just the amount that has been ‘unlocked’ — meaning people end up owing tax on funds they have lost. To make matters worse, these tax charges are backdated to the date of transfer, with interest added. But it can be years before these problems come to light, meaning spiralling tax bills, which are often aggressively pursued by HMRC, according to Snowdon.
“The fallout can be horrendous. In a lot of cases people have to sell their home to pay these bills, marriages have broken up under the strain. It’s awful.
“In some cases regulators have been aware of problems, but haven’t acted quickly enough to shut down these scams. But then HMRC is chasing people for unpaid tax.”
Snowdon wants to see a different approach from both HMRC and the Government.
“HMRC says it is simply doing its job, which is to collect taxes that are owed. It will argue the government sets the rules, they just follow them.” But Snowdon says this legalistic justification doesn’t let them off the hook. “Strictly speaking this is true, but they do have the power to talk to the minister, to say there is an issue here, let’s discuss how it could be changed. But they choose not to. I’ve never really got to the root of why.”
She points out that while the sums involved can be life-changing for individuals who have been scammed, writing off the unpaid tax on these lost funds is effectively “pocket money” to the HMRC, in relation to total revenues collected.
Snowdon is clear that there is precedence for a more empathetic approach. “HMRC has given sweetheart deals to many corporations, reducing the tax owed. I’d like to see a similar approach with individuals.”
Given the rather precarious state of the nation’s finances doesn’t HMRC have a duty to collect what it can? “This is money taken from people who’ve unwittingly fallen prey to fraudsters. I’d rather see a more concerted effort from government and its various agencies to go after the scammers themselves. This could raise far more significant sums and make a real different to the public purse.”
She points out that we lose an estimated £137bn to fraud each year. “We’re in an election campaign where there’s been a focus on tax revenues.The main parties are talking about small savings here and there, but they are missing the big prize. If we could cut down on fraud we could save so much money we could double the sums we give to the NHS.
“I have a real problem with people who are employed by the nation and try and protect its citizens, but seem happier to protect scammers and fraudsters.”
She acknowledges that reducing fraud is no easy task, but says far more could be done. “You have got to invest in resources. You need skilled people and the determination to take cases forward. And it’s not as if this hasn’t been done elsewhere.” The US, she says, has been “very successful” in reducing fraud and scams. “They take a far tougher approach — with sentences for convicted fraudsters similar to those for murder. Authorities are prepared to seize assets prior to a conviction.”
Away from the world of criminal justice, Snowdon would like to see legislative change to ensure scam victims don’t then get caught by the UK’s tax system. “In 2019 I proposed a change to the law. It involves a change to one clause in the Finance Act, which would give HMRC the power to differentiate between scamming and dishonesty. This would enable them to change the definition of an unauthorised payment so it doesn’t include those who have been defrauded, so HMRC are not then chasing them for unpaid tax.”
Snowdon is proposing this change applies to cases between 2009 and 2014 — before more concerted efforts were made to warn people about pension scams. But she is frustrated that even this relatively modest amendment, which would cost the government around £20m, has not made it onto the statute books. Hence her march on Downing Street.
“I’ve spoken to Treasury ministers, some very senior, and its like they are reading from the same cue card. In some cases they’ll initially be sympathetic, but then end up parroting the same line: if we make an exception here it opens the floodgates for others to do the same thing. We don’t want to encourage tax evasion.”
This she says is patently ridiculous, particularly as the changes she’s suggesting are time-barred.
Snowdon’s campaign, and her comments about HMRC failings have inevitably drawn comparisons to the Post Office scandal, a parallel Snowdon says is not entirely fair.
“It’s not the same, but I can see why this comparison has been made. There are similarities, particularly in the attitude we’ve seen from HMRC, the assumption victims must be guilty, and the dire financial consequences people find themselves in.”
Alongside legislative reform, Snowdon would like to see better education around scams, and a change of attitude regarding victims. “Recent research from the FCA found that almost half of us would likely fall for a pension scam. Yet we still persist with that attitude that people are to blame if they’ve been scammed, that they’ve been greedy or stupid. I equate this to the situation we used to have around rape cases, where it was the victim in the spotlight; could her actions have contributed to this crime? These same outdated attitudes pervade the scam space.”
One clear thing that government and legislators could do to address this is to simplify pensions. “The current complexity means most people don’t understand pensions, which is why they end up making mistakes.
“I think we need a root and branch review of pensions: to look at the purpose of them. This should ask hard questions and look at wider issues of savings and wealth. I’m not a socialist ,and this isn’t a political statement, but we should acknowledge there is a finite amount of money available and we need to seriously think about where it ought to go.
“Should we do what Australia does and means-test state benefits but make it normal to save more for retirement? What would encourage younger people to save more?”
Snowdon is clear a wide-ranging review should not look at pensions in isolation, but should address property as part of the wider wealth issue, particularly the challenges younger people face getting on the housing ladder.
“Would people save more into pensions if they could access some of these savings to help them buy a house in their 30s? Of course they would. We have to stop thinking about these things in silos.”
This is one reason why Snowdon says she is a big supporter of the dashboard. She sat on the first dashboard steering committee, and has held a number of technology focused roles in the industry, and is currently an advisory board member at Moneyhub.
But she reports being “disappointed” by both the lack of progress and ambition regarding recent dashboard updates. “I got so fed up when I was working on this. The industry seems very good at thinking of reasons not to do things. There is a strong tendency to focus solely on what might happen if something goes wrong, rather than the potential benefits of getting it right. But you need to take risks otherwise we will never get anywhere.”
She points out there is a lot of talent in the commercial sector that is not being utilised. “I despair. Commercial dashboards are raring to go, but they can’t access the ‘finder system’ to locate other pensions until the MaPS (Money and Pensions Service) dashboard is launched.”
This lack of ambition is reflected in the fact that the architecture will only focus on pensions, she says, rather than including Isas, investments or property. Commercial providers will look to incorporate this, to give people a more holistic view of their wealth and their retirement prospects, but at the moment this won’t be through one central dashboard.
Snowdon says there is much that government could do to improve outcomes for pensions savers. Near the top of her list would be having a single regulatory body overseeing pensions, and also addressing the advice gap.
But for now her main focus is on PSIG, which recently marked its 10-year anniversary by launching a consultation on its own future. Given the clear problems with fraud Snowdon outlines, surely she doesn’t forsee people saying they don’t need a body like this?
The need is there she says, but the voluntary group needs proper funding, or its functions moved to a regulatory body. “Ten years ago no-one was doing anything about this issue. I decided to get together people from across the industry to tackle this problem. We’ve raised awareness of scams, liaised with government and regulators and built codes and guidance around this.
“I’m not trying to do myself out of a role, but I think we are doing the job a regulator should do.”
Snowdon points out that PSIG is an entirely voluntary body: no-one gets paid for their time; in fact Snowdon herself funds a lot of its activities including the website running costs. “My husband thinks that’s terrible, and he doesn’t even know the full costs involved. It’s a lot of money.”
She’s applied for government funding to run the body as a non-departmental public body. “Unfortunately the answer came back that you can’t have funds as there are other bodies who could do this.
“It drives me crazy. I sometimes think why I am doing this when we’ve got regulators who should be doing it?
“It’s going to be hard to stop doing what we do, but I must admit after 10 years I’m tired, mainly because I’ve spent most of that time beating my head against a brick wall. So yes, I am more than a little bit annoyed.”
But despite her obvious frustrations with the industry Snowdon says she retains a “glimmer of optimism” that things could change.
The consuliation on PSIG’s future highlights the precarious state of its funding and may lead to this being properly addressed. She is also encouraged by soundings that Labour have made on issues around pensions fraud. “I have spoken to Labour politicians and there seems to be a light that goes on. They do seem to get the fact that scammers are getting away with a whole load of money — and the Labour Party has figures that look even worse than mine on this. Some I’m hopeful there will be action. There are a lot of things that need to be fixed, but this would be a good place to start.”