Friday, May 29, 2020

Most Pension Scammers Are Advisers, Say Financial Firms

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Crooked advisers are to blame for most investment scams, according to a probe by pension providers determined to root out the fraudsters.

The Pensions Scams Industry Group (PSIG) came to the conclusion after scrutinising more than 27,000 pension transfers from defined benefit to defined contribution schemes by three providers – Phoenix Life, Standard Life and XPS Pensions Group.

The transfers involved more than £1.3 billion.

The group revealed that pension firms carried out due diligence investigations in 52% of transfers because they suspected a scam because an unregulated introducer was involved.

Other triggers included suspicions over introducer based in a different country from the retirement saver or the adviser was on an industry watch-list because scam concerns had previously been raised about their activities.

Lack of understanding

PSIG also disclosed that providers are concerned that many retirement savers do not know enough about their pensions to make sensible financial decisions.

In half of the cases reviewed, the saver had limited understanding or appeared to be unaware who was providing the advice, the fees being charged, or the receiving scheme to which the transfer would be made.

PSIG also raised concerns that perceptions about how scammers worked were not true – pointing out the ban on cold-calling might not be as effective as the government believes.

Margaret Snowdon, chairwoman of PSIG, said: “The number of transfers originating from a cold call amounted to only 6% of the total, while the number of suspicious cases involving unregulated advisers or introducers was far higher.

“This shows that our efforts to convince individuals about the dangers of scams cannot simply focus on the cold-calling ban, as perpetrators are already using other means of contact – like email and online advertising, as well as word of mouth and factory-gating.”

Prevention is best cure

The Pensions Advisory Service, tasked by the government to deliver information about pensions to savers, says prevention has proved to impact the number of scams.

“To raise awareness and help consumers avoid scams, Pension WiseThe Pensions Advisory Service and Money Advice Service have played an active role in Project Bloom, a multi-agency group which was set up by Government to prevent pensions scams by sharing intelligence, raising awareness and coordinating communications to inform and protect consumers,” said a spokesman.

“Scams rely on deception and mislead people about investment risks and returns, and in many cases an individual will lose most, if not all of their retirement savings. Evidence has shown that prevention is the best defence against pension scams.”

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