The Pension Scams Industry Group (PSIG), a voluntary body in the UK comprising representative bodies from across the pensions industry, has flagged up pension advice as their top concern among scheme scams in their latest survey.
The report covered over 27,000 pension transfers among three providers – Phoenix Life, Standard Life and XPS Pensions Group – during 2018.
The transfers covered both defined benefit and defined contribution schemes totalling £1.33bn ($1.72bn, €1.52bn).
The PSIG found 52% of due diligence cases, after they were flagged up as suspicious transfers, involved either an “unregulated introducer, an adviser in a different country from the member, or an adviser who appears on an internal watchlist because of previous concerns”.
Scheme members left unaware
Similarly, another problem area was member awareness. In 49% of cases, members “had limited understanding or appeared to be unaware of who was providing the advice, the fees being charged, or the receiving scheme to which the transfer would be made. Such customers may well be regarded as ‘vulnerable’,” the PSIG found.
“A small number of rogue advisers are accounting for the large proportion of scams, and they should not get away with these unscrupulous practices,” Danny Cox, Chartered Financial Planner at Hargreaves Lansdown, said to International Adviser.
“The vast majority of financial advisers have the integrity, values and intelligence to do the right thing for their clients.”
Cold calling decreases while scams are higher
Margaret Snowdon, chair of the PSIG, said, while commenting on the report: “We have seen the focus move from pension liberation to pension scams and, more recently, to investment schemes. It is important to be able to identify trends in scams as early as possible to help law enforcement and practitioners act to disrupt scammers and to protect both members and customers”.
“The survey, although not statistically significant or robustly controlled, shows us that some things we assumed are not necessarily the case. For example, the number of transfers originating from a cold call is lower than we expected but the number of suspicious cases involving unregulated advisers or introducers is higher.
“The survey shows that practitioners value the voluntary industry Code of Practice, although we know that it is not followed by all and that some schemes have not yet updated their processes to fully reflect the Code.”
The pension industry’s role
Sankar Mahalingham, head of DB Growth at XPS Pensions Group, said: “The pensions industry, as a whole, needs to do more to help educate pension scheme members on the unintended consequences of pension freedoms. Advisers, employers and pension scheme trustees are on the front line, best placed to help members with the decisions being made with the largest savings pot most people will ever own.”