Will Pension Scams Be The Next Big Financial Scandal?
Experts are warning we could be on the cusp of the next big financial scandal after pension scams are costing the Brits up to £4 billion a year.
Scam cases have increased sharply since 2015 after relaxation of pension rules took effect where George Osborne allowed savers access to 25% of their retirement pots tax-free from the age of 55.
In 2018 at least 100,000 people transferred out of defined-benefit pension schemes.
It is believed that a third of all pension transfers exhibit “red flags”, up from one in 19 three years ago.
A TV celebrity is among the thousands of British savers who have been caught out by fraud by transferring cash out of defined-benefit pensions schemes into unsuitable or precarious schemes.
One of Britain’s well-known TV broadcasters, who cannot be named for legal reasons, transferred £1 million into an offshore pension scheme which has supposedly collapsed.
Other cases include a former army veteran handed over £34,000 to invest in truffle-free farms that were never cultivated.
Another case saw an airline pilot lose £380,000 in a scam now pursued by HMRC.
Baroness Altmann, a former pensions minister said:
“Pension scams have the potential to be the next big financial scandal.
“Regulators have failed to respond with adequate urgency and are leaving consumers at the mercy of fraudsters. The fallout risks putting younger people off pensions altogether.”
The Pensions Regulator (TPR) is currently pursuing seven criminal investigations into potential scams which claim losses to saver’s pensions of around £55 million.
TPR chief executive, Charles Counsell wrote a letter to the chairman of Work and Pensions Committee (WPC), Frank Field, revealing that the investigations cover 52 schemes and 38 suspects – which the regulator is treating as potential targets.
Counsell also confirmed that the investigations cover a “range of complexities and possible outcomes” which includes potential charges of fraud, money laundering, and employer-related investments.
Kate Smith, Head of Pensions at Aegon UK said:
“Pension fraud is, unfortunately, an ongoing threat as scammers have chameleon-like behaviour and are forever adapting to new opportunities…… much more is needed to be done, particularly as scammers move online and use social networks to dupe individuals out of their money.
“The government should work closely with the regulators to stem the tide of fraud and help keep the threat of scammers in the spotlight. A clear message needs to be sent to fraudsters that pension scams will not be tolerated by significantly increasing the number of prosecutions.”
As Will writers and private client professionals, what do you think the industry and Government can do to reduce pensions scams?