Out-Law News | 12 Nov 2019 | 2:37 pm | 3 min. read
New research which shows the extent to which consumers are falling victim to pension scams brings into question the effectiveness of public awareness campaigns, according to an expert.
According to data gathered by the UK’s Financial Conduct Authority (FCA) and the Pensions Regulator (TPR), the average amount lost by victims of pension scams in 2018 was £82,000, but 63% of individuals surveyed said they would trust someone offering unsolicited pensions advice.
Pensions expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law, said: “This report highlights the difficulties facing regulators and the pensions industry in the face of the personal and persuasive techniques deployed by scammers, particularly if such large numbers of people are prepared to trust advice coming out of the blue."
“It does bring into question how much public awareness there is of the cold calling ban or, more generally, the risks of pension scams, despite the various campaigns run,” said Fairhead.
The analysis was carried out as part of the regulators’ joint ‘ScamSmart’ campaign, and involved a survey of over 4,000 people. Almost a quarter of respondents said they took 24 hours or less to decide on a pension offer, and 63% said they felt confident making decisions about their pension.
The research also found that individuals with a university degree were 40% more likely to accept a free pension review from a company they had not dealt with before, and were 21% more likely to take up the offer of early access to their pension pot. The FCA said both of these offers were common scam tactics.
The news follows the recent launch of the ScamSmart campaign, which includes public awareness advertising and a website designed to give savers tips on how to spot a pensions scam.
Fairhead said the findings put continued pressure on providers and trustees being asked to make transfers of pensions to scrutinise carefully where those funds are destined for.
“Direct consumer engagement, as encouraged by the Code of Good Practice, also remains critical as a scammer will often have developed rapport with the intended victim. Logically it will be difficult to counter that without some equally personal engagement,” Fairhead said.
“This might seem administratively time-consuming but, if a member thinks twice and does not fall victim to a scam, it could save the considerably greater time and cost of a complaint or claim at a later date,” Fairhead said.
The code of practice for combating pension scams was updated earlier this year to reflect developments such as the ban on cold calling which came into force in January. The code provides recommendations and guidance to trustees and providers in areas such as reporting suspected scams and how to deal with complaints from scheme members.
However, Fairhead said the upcoming general election had thrown proposed legislative changes that could help reduce scams into uncertainty.
“The law remains in an unsatisfactory state. The changes to the statutory right to a transfer that were envisaged in the Pension Schemes Bill are now on hold given the General Election. You would think there would be cross-party support for this, but it remains to be seen how quickly the Bill might be picked up again once a new government is formed,” Fairhead said.
“For the moment, there is little that can be done other than repeated public warnings like this and continued vigilance amongst those in the industry handling transfer requests,” Fairhead said.
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