Out-Law / Your Daily Need-To-Know

Out-Law News 2 min. read

Pension code of practice updated as industry cracks down on scammers

The industry code designed to support pensions trustees and providers in tackling pensions scams has been updated for a second time in a year to reflect the latest regulatory developments, such as a ban on cold calling.

The updated Pensions Scam Industry Group (PSIG) code of practice (107 page / 2.6MB PDF) includes a number of changes, such as guidance designed to help trustees and providers deal with claims management companies and updates on how to notify the UK’s fraud reporting centre Action Fraud of scams.

Pensions litigation expert and PSIG group member Ben Fairhead of Pinsent Masons, the law firm behind Out-Law.com, said the revisions were critical.

“This latest version ensures the code remains up-to-date, both in terms of reporting on legal developments and in keeping due diligence recommendations fresh,” Fairhead said.

“This is important because the code is increasingly the barometer of the due diligence expected when assessing the risk of making a transfer to a pension scam. In particular, there are signs of it becoming a key reference point now for the Pensions Ombudsman when considering complaints by members of schemes who have lost out as a result of a transfer into a scam,” Fairhead said.

the code is increasingly the barometer of the due diligence expected when assessing the risk of making a transfer to a pension scam

The updated code noted that scammers’ tactics are evolving, and are now more likely to involve scamming investment schemes than persuading savers to access their pensions before retirement age.

Although the government implemented a ban on cold calling earlier this year, the code said those intending to operate a pension scam may still make contact with scheme members through unsolicited calls, text messages or emails.

It warned providers and trustees to be wary of letters of authority requesting information for a company not authorised by the Financial Conduct Authority (FCA), or of forms appearing to emanate from an FCA-authorised source, but which could be that of an unregulated third party.

The industry group also looked at recent Pensions Ombudsman cases and strengthened advice on due diligence and decision-making as a result. It referred in particular to a recent determination by the ombudsman in a case brought by a member of the Police Pension Scheme, who said his fund had been transferred without adequate checks being carried out.

The complaint was upheld and the new code noted that the determination reinforces the need for robust due diligence when trustees and administrators receive a transfer application, as well as a reminder of the importance of “clear and prominent warnings being given to members about the risks of pension scams”.

Another addition to the code is guidance on how to deal with claims management companies encouraging victims of scams to start legal action against pension schemes after a transfer. The code recommends that scheme providers respond “robustly”, stating where possible that they have always followed prevailing legislation, a trust deed, and rules and guidance from the Pensions Regulator; and also that if a member or former member has a complaint or dispute then, in the first instance, they should follow the procedure set out in the scheme’s internal dispute resolution procedure.

“There are limits to what can be done to stop pension scams. However, if those dealing with transfer requests follow the guidance in the code closely, it should help reduce the sums passing into the hands of scammers. It will also reduce the risk of maladministration findings, which can prove costly if due diligence has not been carried out properly or if appropriate warnings are not given to the transferring member,” Fairhead said.

The latest version of the code replaces the previous update which was published in June 2018. The code first came into force in 2015.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.