Financial advisers and/or unregulated introducers have had some involvement in half of suspected pension scams, a report by the Pension Scams Industry Group (PSIG) has claimed.
The report found around half (52%) of red flags raised by due diligence on suspected scam pension transfers involved an unregulated introducer, an adviser in a different country from the scheme member, or an adviser who appeared on an internal watch list because of previous concerns.
The PSIG gathered information from three pilot providers – Phoenix Life Assurance Company, Standard Life Assurance Company and XPS Pensions Group – throughout 2018, with a view to obtaining a greater understanding of the transfers market and pressures faced by transferring schemes and administrators during the process.
The survey looked at more than 27,000 defined benefit and defined contribution transfers, worth some £1.33bn in total.
The report also flagged member awareness as a significant problem. In roughly half (49%) of cases the group considered, the member had limited understanding, or appeared unaware of who was providing the advice, the fees being charged or the receiving scheme to which the transfer would be made.
Cold calls ‘lower than expected’
Elsewhere, the body found pensions cold calling was a smaller problem than it had initially thought, with just 6% of the transfers in the sample appearing to have originated from cold calling.
It suggested this could be because it was expected that a ban on pensions cold calling was imminent, or else because the scheme members were unwilling to say they had been cold called, or did not realise it.
The report also described self-invested personal pensions (SIPPs) as “the scammers’ vehicle of choice”, with SIPPs, including international SIPPs, accounting for some 95% of all transfer requests during 2018.
PSIG chair Margaret Snowdon said: “This research highlights that some things we previously assumed are not necessarily the case. For example, the number of transfers originating from a cold call amounted to only 6%, while the number of suspicious cases involving unregulated advisers or introducers was far higher.
“This shows that our efforts to convince individuals about the dangers of scams cannot simply focus on the cold-calling ban, as perpetrators are already using other means of contact – like email and online advertising, as well as word of mouth and factory-gating.”
XPS Pensions Group head of DB growth Sankar Mahalingham said he had seen evidence of potential scam activity increasing over the last two years, from one in 12 in 2012, to one in eight cases in 2018.
“Paper checks alone will not be able to pick up every scam,” he added. “More needs to be done to educate members, not just about pension scams, but also about the nature and value of their defined benefit pensions. This will allow them to better judge the pros and cons of any potential pension transfer and the risks inherent to it including the risk of pension scams.”