Out-Law / Your Daily Need-To-Know

UK government announces further anti-pension scams plans

Out-Law News | 12 Jul 2021 | 3:34 pm | 3 min. read

The UK government has again committed to tackling pension scams, pledging to release a Fraud Action Plan and review its planned flag system for pension transfers regularly.

In a response to a House of Commons Work and Pensions Committee report on protecting savers from pension scams, the government admitted more needed to be done to tackle the problem and enforce the rules against scammers.

Pensions scam expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law, said the government response was largely positive, but lacked detail in some areas. Fairhead said the government had adopted the approach of suggesting some existing measures were sufficient to tackle pension scams – which would be more true in some areas than others.

The government said it would soon publish a fraud action plan covering 2022-2025. The plan will see the government working with industry, including the pensions industry, to remove vulnerabilities, shut down fraudulent infrastructure, bring offenders to justice, and support consumers.

There would be more emphasis on gathering and sharing data relating to pension scams, with the work set to be led by the Pension Scams Industry Group (PSIG) and other members of the multi-agency taskforce set up to tackle scams, which is known as Project Bloom. The government said Project Bloom was exploring opportunities for improved coordination of industry intelligence, and there would also be an increased emphasis on the need to report scams to Action Fraud.

The government agreed with the committee that there should be more focus on the issue of ‘secondary scammers’ – for example claims management companies targeting consumers who have already been the victims of fraud. This point was also echoed by the Financial Conduct Authority (FCA) and the Pensions Regulator (TPR) in their responses to the committee’s report.

According to the response, the government is supportive of making the PSIG Code of Good Practice in Combatting Pension Scams a statutory requirement. It is also considering putting Project Bloom on a more formal footing, although it showed less support for the committee’s recommendation of rebranding Project Bloom as the Pension Scams Centre.

The government committed to a review of the pensions transfers regulations within 18 months of them becoming operational, with a further review every three years to ensure the red and amber flag system remains suitable.

The government and FCA did not entirely agree on the committee’s recommendation that an alert on the FCA’s warning list should constitute a ‘red flag’ under the new regulations. The FCA said that because the warning list covered more areas than just scam activity, and because it was constantly changing, inclusion on the amber list could be more helpful.

However, the government said it thought the existing complaints system available to consumers who are unhappy with regulatory actions was sufficient, and there was no need for a review of the recourse available, as recommended by the committee. 

The government said HM Revenue & Customs (HMRC) would explore solutions to the problem which arises when pension scam victims are left owing large tax bills. It did not directly respond to the committee’s proposal that legislation should be considered to give HMRC the option of not pursuing tax penalties.

“Certainly, the lack of engagement in relation to the tax charges faced by pension scam victims will be viewed as disappointing for those affected. This was a missed opportunity to recognise the unsatisfactory position for individuals who received early access to pension savings long before there was any significant public awareness of the risks of pension liberation,” Fairhead said.

The responses also revealed that TPR was not able to co-fund the ScamSmart campaign alongside the FCA. Instead, it was focusing its efforts on its Pledge to Combat Pensions Scams campaign, which is aimed at positively influencing the behaviour of trustees, providers and administrators to protect the interests of their savers.

“Looking ahead, there is recognition of a need for better sharing of intelligence and data on scams. Much also hinges on the impact the forthcoming regulations will have on pension transfers, and the government is currently considering the responses to its consultation. It has acknowledged the regulations will need to be kept under review once implemented – views have been very split on the draft regulations,” Fairhead said.

“Regulatory and industry guidance will also be critical to their eventual success, and it looks like there might be more of a shift towards expected reliance upon the Code of Good Practice given the government’s stated support for compliance potentially becoming a statutory requirement,” Fairhead said.