Combating pension scams – It’s good to talk
From the blog: In perhaps an ironic twist last month, Northumbria Police was found guilty of not doing enough to protect one of its officers from the risk of becoming the victim of a pension scam.
As a result, they were forced to reinstate the claimant’s accrued benefits in their scheme. This could turn out to be a landmark event in what is fast becoming a landmark year in the fight against pension scams.
Telephoning the member to ask about their transfer makes it more likely that the scammer is bypassed
Many schemes will look at this case and ask themselves if they could be doing more for their members. So, what more could they do?
June saw the publication of the Pension Scams Industry Group’s revised Code of Good Practice on Combating Pension Scams.
A simple call works wonders
The original 2015 code is recognised as industry best practice and was the catalyst for many trustees to review their procedures for protecting members from scams.
One of the key changes to the revised code is a recommendation that all transfers include a telephone call with the member to discuss the circumstances around the transfer.
Administrators already carry out checks on the transfer paperwork for signs of scams, so why the need for a telephone call as well?
It is increasingly being recognised that the traditional checks of transfer paperwork for scam 'red flags' have significant limitations. Scammers are fully aware of the process and so will often offer to fill in the paperwork on behalf of members, ensuring that it is red-flag-free.
Of course, many members are daunted by lengthy pensions paperwork and are only too keen to hand it over to an 'expert' to fill out on their behalf.
Telephoning the member to ask about their transfer makes it more likely that the scammer is bypassed. The call allows the administrator to have a conversation with the member about why they want to transfer, where the money is going and who is supporting them with the process.
Spot the red flags
Based on our experience of introducing calls into the transfer process over the past three years, the impact has been telling: over 10 per cent of calls made by our specialist scams team have identified red flags. These were cases where the transfer had been signed off as scam-free based on the information in the standard paperwork.
Given the recent surge in transfer activity, with the Pensions Regulator estimating that transfer values of £14.3bn were paid out of defined benefit schemes over the year to March 31 2018, our analysis suggests that each year more than £1bn of members’ savings could be at risk of being stolen through pension scams.
Examples of red flags that can be identified through this telephone call are adviser related issues (a common occurrence is the adviser on the paperwork being different to the adviser name given by the member on the call), suspicious courier activity, the promise of high guaranteed investment returns and worrying details of secondary transfers to foreign arrangements, which would typically not be mentioned on the transfer paperwork.
The code is only voluntary, not compulsory, but members should be pushing for their trustees to adopt its recommendations without delay. In the Northumbria Police case, a 15-minute telephone call could have made all the difference.
Ben Fisher is a senior consultant and member of the pension scams identification team at XPS Pensions Group