Arguably one of the biggest threats to the pensions industry in many years, pension scams, have already siphoned hundreds of millions from the retirement pots of thousands.
Behind the promise of a loan or a cash incentive, these scams combine high fees and dubious unregulated investments with the possibility of huge tax charges, often to the surprise of unsuspecting victims. In some cases funds are simply stolen as they are channelled around the world.
With the advent of greater pension freedom from 6 April 2015, many within the industry fear that scammers will attempt to capitalise on the uncertainty that members of the public have when managing their retirement savings.
To help safeguard against pension scams, ‘Combating Pension Scams – A Code of Good Practice’ has been devised by a combined group of industry experts including Brian Spence of Dalriada Trustees Limited. Dalriada currently acts as Trustee for over 60 schemes suspected of being involved in some form of pension scam.
This voluntary code raises awareness of trustees and administrators to the threat of pension scams and should ensure consistency across the industry as to the approach to be taken when processing transfer requests. The code came into effect 16 March 2015 and sits alongside existing guidance, most notably the Pensions Regulator’s Scorpion campaign and the Scam Smart campaign run by the FCA.
The Code clearly highlights the common attributes of pension scams and how they can be spotted. The code also includes template letters which will aid in the difficult task of communication.
Importantly, the new code includes guidance on the difficult issue of refusing to permit a transfer. To refuse to follow the wishes of a member is an unenvious task. The Code explains not only what should be considered, but also documented, when assessing if a transfer should proceed, even when a member technically has the right to transfer.
It is now up to all within the industry to embrace the Code and it should be regarded as essential guidance. Professionals within the industry should be familiar with it and administrators should incorporate it into their internal procedures.
Every transfer to a scam prevented is a retirement income saved.