Time to clamp down on pensions fraud
The Government has several means open to it to tackle pensions fraud. It’s time it used them, argues Tom Selby, senior analyst, AJ Bell
The menace of pension fraud risks is undermining any remaining trust savers have in the industry and Government to protect their savings. The court of public opinion won’t differentiate between the good, regulated side of the industry and the criminals who seek to part pensioners from their hard-earned cash.
Remember Robert Maxwell raiding the pensions of Mirror Group? A case involving one individual still undermines trust across the sector.
So why, then, do policymakers continue to prevaricate about taking meaningful action to stop scammers? Yes there have been initiatives – the multi-agency ‘Scorpion’ communication campaign for instance – but nothing that really attacks the arteries of this sub-industry.
The problem of scams has been exacerbated by the pension freedoms which, while handing savers welcome flexibility over how they spend their retirement savings, have also provided fertile ground for con men.
To give you a sense of context, in the five months after the freedoms were launched City of London Police figures show fraudsters took £9.1m from savers – more than double the figure from the same period a year earlier.
Cold-calling is a common tactic used by many of these firms to target unsuspecting victims.
When asked why the Government had not taken this action to ban cold-calling, then pensions minister Ros Altmann said: “I’ve looked at making cold calls illegal but if they come from abroad there’s nothing we can do. We could put in the legislation, it would take legislative time away from other things, but actually it probably wouldn’t solve the problem. You can tell people it’s illegal but they will still take the phone call.”
This seems to suggest the fact a cold-calling ban wouldn’t completely solve the problem is sufficient reason not to pursue it.
History will reflect poorly on a Government that introduced freedom and choice in pensions, but failed to do everything in its power to protect savers from fraudsters. By banning cold-calling, policymakers could cut off at least one of the heads of what is a many-headed serpent.
And the longer the Government delays action, the more elderly and vulnerable people will fall victim to the tactics of these dodgy salesmen.
But this is not the only avenue open to the Government. Policymakers should also look again at mandating professional trustees for Small Self-Administered Schemes (SSASs), legitimate savings vehicles often abused by fraudsters. SSASs often receive a bad press because they are abused by scammers, when in reality the vast majority of SSASs are utilised by small business owners who want to invest in their company.
In addition, a reintroduction of permitted investment lists for SIPPs – similar to those that existed in the mid-2000s – would help combat pension fraud by weeding out some of the weird and not-so-wonderful investments currently being flogged to savers.
So there are options open to the Government to clamp down on pension fraud. But the longer we delay, the more damage will be done to the industry as a whole.