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Updated code of practice reflects regulatory efforts to combat pension scams

Out-Law News | 07 Apr 2021 | 9:46 am | 2 min. read

The Pension Scams Industry Group (PSIG) has updated its voluntary code of good practice, making the document more user-friendly and reflecting recent regulatory and legal developments.

The revised code is now divided into five components, including a framework document, practitioner and technical guides and a resources pack. The update is the third in less than three years, following the code’s original publication in 2015.

Pension scams expert Ben Fairhead of Pinsent Masons, the firm behind Out-Law, and a member of the technical group which developed the updated code, said: “The Code of Good Practice is gaining increasing traction within the industry and is well-recognised and supported by the Pensions Regulator [TPR] and minister."

“The new format should make it practically easier to follow and ensure due diligence processes for handling transfers are up to date. It remains a voluntary code but one that is likely to set the benchmark of standards expected, including in prospective Pensions Ombudsman complaints if transfers end up in the hands of scammers,” Fairhead said.

“A further update later in the year is almost inevitable as we await sight of draft regulations that are likely to cause very significant changes to the statutory right to a transfer and trigger a need for trustees to revisit their transfer processes in a more fundamental way,” Fairhead said.

The updated code includes new specific calls to action for trustees and administrators of pension schemes, including a recommendation to consider calling pension scheme members during the due diligence process and also that a final telephone call should be made with the member before any transfer payment is made, when sufficient concerns of pension scamming have been identified. This mirrors requirements outlined in TPR’s pledge to combat pension scams.

Trustees and administrators should also report all transfers of concern, not just those which are refused; and make reports to a number of different agencies. The code also says appropriate management information should be developed and maintained on transfers, including where transfers are refused, cancelled by a member when concerns have been raised, or paid under discharge at the insistence of the member.

Separately, the House of Commons Work and Pensions Committee recently published a report from its inquiry into protecting savers from pensions scams. The committee made several recommendations, calling for better coordination between the Department of Work and Pensions and HM Treasury to combat scams.

The committee said there needed to be better reporting and data on the scale of the problem and suggested that multi-agency taskforce Project Bloom, which was set up to tackle pension scams, should develop measures to enable better understanding. It also said national fraud reporting centre Action Fraud should be accountable to Project Bloom for its work, and should have a coordinating role for pension scam victims.

The report said the Pension Schemes Act 2021 would help combat scams, but the committee recommended that a review of the legislation should be carried out within 18 months of regulations being operational.

Fairhead said the report was a positive step, and coupled with use of the code of practice could help the process of stamping out pension scams.

“The breadth of the report is welcome, covering all angles with pension scams in terms of prevention of future scams as well as looking at ways to provide greater support and recompense for victims. The recommendations are ambitious but worth the investment of time and money if current weaknesses in the system such as around reporting of scams are to be resolved. Ultimately, a concerted effort across the board might make pensions a much less attractive target for fraudsters,” Fairhead said.