Beware of snake oil pensions salesman

Beware of scammers dipping into your pension says David Davidson of Spence and Partners'. Know what to look out for and remember, if it seems too good to be true it probably is.

Charities rightly have a reputation for adopting a more paternalistic attitude towards staff and I’m sure they would be concerned if it was felt that their actions were exposing staff to unnecessary risk. However the approach taken to retirement benefits could in many cases could be doing exactly that.

Charity employers make a commitment to help staff fund for their retirement provision throughout their working life. They closely monitor contributions; look to ensure that the scheme they provide offers staff the best choice and benefits possible and that they have access to information and advice when they need it. However, coming up to and at retirement, just when members have accumulated their largest benefit and have the most difficult decisions to take about their retirement, is when they are at their most vulnerable to scammers and unscrupulous individuals and the point at which little if any support is available.

I was struck by a recent case highlighted by the Pensions Regulator where £16 million was invested, and remember this was made up of transfers from other, reputable schemes, the value was reduced to approximately £991,000.  This is all before any tax penalties are considered in respect of liberation payments. Any return to members is likely to be a tiny fraction of the transfer value they paid in.  Assets had disappeared in a myriad of suspect investments and those affected have been consigned to a retirement considerably less comfortable than the one they might have expected.

The statistics are frightening. According to research carried out by Citizen’s Advice:-

  • 10.9m pensions consumers received unsolicited contact since April 2015;
  • 8.4m consumers were offered unsolicited pension advice/reviews in the last year;
  • Action Fraud – in first 6 months of Pension freedoms the average pensioner affected by pension fraud lost £163,000;
  • The average consumer has difficulty in spotting scam offers.

Nobody knows exactly how much has been lost to pensions fraud but some estimate it could be as high at £3bn.

Recent research published by Retirement Advantage has shown that 35% of savers over 55 years old have been targeted by scammers offering free pension reviews or investment opportunities. This is an increase from figures released in June 2015, showing that one in five people over 50 had been approached by would-be scammers. As the people being approached here are over 55 this is not about pension so-called liberation, it’s about separating individuals from their retirement pots. The Pension Regulator press release outlined classic elements of scam behaviour including:

  • Potential scheme members were cold called and text messaged by introducers, who were paid on commission for the introduction.
  • Without their knowledge, members’ funds were invested in exotic sounding, unregulated investments overseas, such as tree plantations in Fiji, Brazilian teak plantation land and fund shares based in the Cayman Islands.
  • The scheme appeared to have been a vehicle for pension liberation and that the trustees were aware of this. TPR found that some scheme members (below the age of 55) received cash advances or loans via introducers with, in at least one case, a scheme member receiving a loan directly from the scheme assets.

Never has the old adage ‘if it seems too good to be true it probably is’ been more apt. So what should employers be looking to do to protect staff from these unscrupulous individuals? People need to be made aware of the risks and what to look out for. Snake oil salesmen promising guaranteed returns and buy now while stocks last investments are unlikely to be genuine. The illusion of high growth with the promise of low risk in a time of low inflation and interest rates is unachievable. A good start as a minimum would be to supply all staff with a copy of the Pension Regulator’s Guide on what individuals should be on the look out for. Charities could supply this to staff via e-mail or letter or it could be included as part of an annual update.

Additionally employers could ensure that any staff presentations from your pension provider/independent financial adviser on pensions include some warnings about scams. It is also certainly well worth considering having access to an independent financial adviser available for staff as they reach retirement age. In addition we need to stop the scammers getting hold of the money and, if you can’t stop people giving it away, you need to save people from themselves. All hail the Nanny State! In August DWP / HM Treasury published Pension Scams: consultation response. The response suggests:-

  • a ban on cold calling in relation to pensions, to help stop fraudsters contacting individuals;
  • limiting the statutory right to transfer to some occupational pension schemes;
  • making it harder for fraudsters to open pension schemes

This is excellent news however it is nothing more than a statement of intent at this stage and will remain so until legislation in enacted. Hopefully the simple steps I’ve suggested here will keep more people out of the clutches of the scammers and have their pension savings protected to provide for the safe and comfortable retirement they were always intended for. CFG is proud to support Charity Fraud Awareness Week 23-27 October. Sign up to the CFG Counter Fraud Pledge and we'll send you a toolkit to get you started on your journey to preventing fraud in all its forms: CFG Pledge - for print

This post was last reviewed on 17 October 2018 at 16:05
« Back to all blog posts