Out-Law News 2 min. read
23 May 2017, 3:28 pm
The figures show a striking increase in the average loss per case: from an average of £5,680 over 1,910 cases in the year to March 2015; to an average of £28,668 over 652 cases in the year to March 2016; to an average of £51,970 over 250 cases in the year to March 2017, according to pension scams expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law.com.
Fairhead's comments came after a number of reports on the figures highlighted a record-breaking £8.6 million reported as being lost to fraud by 24 individuals in March 2017, up from the £779,000 reported by 12 individuals in February 2017. Just under £13 million was reported lost to fraud in total in the year to March 2017.
"Despite the focus of coverage on the large reported losses in March this year, the figures show a dramatic drop in the number of reports of pension liberation fraud over the past couple of years but, equally, a huge surge in the average loss being suffered," he said. "This is presumably because victims are more likely now to consider their entire pension funds have been lost."
"It has to be borne in mind, of course, that the timing of the reports does not necessarily reflect when the losses were suffered: it is possible that individuals are coming forward now in relation to scams that have come to light more recently but where the activity took place a year or two ago. The average age of the victims have scarcely changed either, which does not point strongly towards the 'Freedom and Choice' regime having a major impact on individuals over the age of 55 being scammed," he said.
He added that it was likely that a lot of scam activity "will not have been identified yet given the sophisticated way in which fraudsters operate, concealing the scam from their victims".
According to City of London Police, the average age of the 2,178 individuals who included their date of birth when filing a pension fraud report was 53 in the year ending March 2015, 54 in the year ending March 2016, and 53 in the year ending 2017. Reports were received from individuals aged between 20 and 103 over the three-year period, according to the figures.
Changes to the law in April 2015 gave members of defined contribution (DC) pension schemes more freedom to access their pension savings from the age of 55 without incurring heavy tax penalties or necessarily having to purchase an annuity. At the time, financial watchdogs warned that this could lead to an increase in scammers contacting people approaching 55 in order to exploit their interest in the change in the law.
Before the new rules came into force, scammers tended to market so-called pension 'liberation' arrangements to younger savers, claiming to allow them early access to their pension savings by transferring them into unregulated, exotic investments. Pension scheme rules prevent individuals from claiming pension benefits before the age of 55 unless doing so on ill-health grounds; and tax charges for 'unauthorised' payments from a pension pot can be as much as 55% of the value of the payment.
Fairhead said that, notwithstanding the reduction in reports, the amount lost to pension scams remained high.
"The impetus for legislative change is very much still there," he said.
"The hiatus in the consultation process caused by the general election is unfortunate – although, logically, whatever form the next government takes, there ought to be cross-party support for tackling pension scams," he said.
A government consultation on proposed measures to tackle pension scams, including a ban on cold calling and limiting the statutory right to transfer pension savings into another occupational scheme to cases where there is a 'genuine employment link', closed in February.