Pensions savers will have stronger scam protection
PENSION savers will have stronger protections against scammers trying to tempt them into transferring their life savings with bogus offers.
New regulations, which come into force on November 30, will mean that suspect transfers can be stopped from ending up in the clutches of a fraudster, as pension trustees and scheme managers will have new powers to intervene.
Fraudsters frequently offer “free pension reviews”, early access to pension cash, or other “time-limited” offers, which can lead to people being conned out of savings they have been building up for decades.
The changes mean that trustees and scheme managers will be able to prevent a transfer request by giving it a “red flag”.
In other circumstances where fraud is suspected, an “amber flag” will pause a transfer until the scheme member can prove they have taken scam specific guidance from the Money and Pensions Service (Maps).
The UK Government said it is working closely with regulators, the Pension Scams Industry Group (PSIG) and enforcement agencies to protect pensioners and raise awareness of the dangers.
Minister for Pensions Guy Opperman said: “We are tackling the scourge of pension scams in practical terms to safeguard pensioners’ hardearned
savings. These measures will provide better protection for savers.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Scammers rob people of their hard-earned retirement savings and for too long schemes have been powerless to stop them. These measures are a welcome step forward in protecting scheme members by giving schemes the power to stop transfers or refer members for
guidance if they have any suspicions.”
Anthony Arter, Pensions Ombudsman, said: “Having witnessed the real damage that pension scams can inflict on an individual’s retirement I welcome the new transfer regulations which look to make transfers safer.
“I am optimistic that over time statutory clarity regarding the level of due diligence expected of trustees and additional information and guidance to be given where appropriate to those planning to transfer, will help combat pension scams, and also reduce the number of transfer complaints to the Pensions Ombudsman.”
The Government has committed to reviewing the new regulations within 18 months to ensure they remain as effective as possible.
Tom Selby, senior analyst at AJ Bell, said: “Unscrupulous scammers have ramped up their activity during the pandemic, spurred by the increased financial vulnerability experienced by millions of people during lockdown. Most of these scams now occur outside pensions, with fraudsters often targeting people aged 55 and over by encouraging them to shift their hard-earned retirement pot into a sham investment.
“Nonetheless pension-based scams do still exist, with the focus often on facilitating access before age 55. Given the terrible impact they have on victims - who often end up losing most if not all of their pension - the Government is right to hand schemes greater power to protect members.”
Mr Selby added: “Crucially, it will be up to pension schemes to decide whether a transfer is suspicious or not. Whereas previously blocking a suspicious transfer came with the real risk of being sued, this legislation creates a specific legal framework within which members’ interests can be protected.”