Pension scams will never go away. Because an individual can accumulate a significant sum of money in their pension by the time they reach middle age, they will always be appealing to scammers and fraudsters.
That doesn’t mean, however, that we should give up the fight. It is vital policymakers and the wider pensions industry continue to monitor scam activity and act where possible to protect savers.
But it does mean we need to recognise that the types of scams evolve and change, and therefore our action and our response needs to change too.
The Work and Pensions Committee is currently looking at the issue of pension scams in the context of pension freedoms. Now, more than ever, it’s important we develop further action. The financial uncertainty created by the Covid-19 outbreak is like blood in the water for scammers; millions of people face the prospect of unemployment, losing their main source of income and staring down the barrel of serious financial hardship.
Such turmoil will inevitably see more people targeted by scammers, with their hard-earned – and sizeable – retirement pots likely to be a prime focus.
Similar to the fire triangle, – where you need heat, fuel and oxygen for a fire to burn – there are three elements we need to stop scams.
We need to raise awareness so that people are tuned into the threats of scams, and their implications. We need tougher penalties and consequences for scammers so that the downside or risk of their action is a serious deterrent. And finally, we need to enable pension schemes to take the right action to stop scammers where possible.
All three elements need to be in place to have effect.
In our response to the Work and Pensions Committee’s inquiry, we set out several ways government and regulators can take the fight to pension scammers.
These include broadening the cold-calling ban to cover not only social media and emails but also factory gating where lead generators meet prospective clients in person.
As well as improved guidance from Action Fraud on what scams to report and how Action Fraud will identify whether to investigate a scam based on a scoring system and will only investigate a scam once is has been reported by several different sources or is of a large enough size.
This is wider, however, than just pension scams. This extends to investment and other financial scams. Pension freedoms allows someone to encash their entire pension pot. What they do with it after that – how they invest or spend it – is up to them. Pension schemes cannot keep tabs on that.
We need as a society to take scams more seriously; to put our money where our mouth is. Creating an overarching role in Parliament – such as a minister for scam prevention whose sole focus is stopping the ever-growing swell of scams – could be an effective way to help people protect their hard-earned wealth.
Rachel Vahey is senior technical consultant at AJ Bell