Are you protecting members – and trustees – from liberation scammers?

When the fast-moving world of scams and fraudsters meets the complex and sometimes clunky world of pension legislation, it can put trustees in a challenging bind.

Members have a statutory right to a transfer, but this can on occasion be disastrous for their pension savings, placing the risk of how to deal with such a scenario at the feet of trustees.

Protecting both groups

So how can you ensure you are doing what you can to protect members, while also protecting trustees?

Richard Butcher, managing director of professional trustee company PTL, said the freedom and choice reforms created a potentially fertile environment for scammers.

If schemes follow the code available, they’re less likely to be found wanting by the ombudsman

Margaret Snowdon, JLT Benefit Solutions

“The Budget’s freedom and choice has made legal scamming a lot easier,” he said. “And I understand a lot of schemes are being registered [that may be fraudulent].”

With the freedom for members to take larger proportions of their pot as cash, they may be tricked into moving their money into phoney investments after having taken it out of the scheme entirely.

Butcher added schemes should make sure members receive all the correct information and, if they still plan to transfer out to a suspect scheme, could warrant a personal call – but trustees should be careful not to overstep the mark.

If trustees themselves need guidance, said Ian McQuade, client director at governance consultancy Muse Advisory, the Pensions Regulator should be the first port of call.

However, he added: “Sometimes the regulator has to be cautious in its response. If it is investigating a scheme then it will not confirm that the scheme is genuine.

“So while the trustees are trying to get some comfort that the transfer is acceptable, the member and the adviser will be chasing on a regular basis and in many cases threatening to refer the case to the pensions ombudsman.

“It is fair to say that trustees are stuck between a rock and a hard place.”

Intelligent scammers

Margaret Snowdon, director at JLT Benefit Solutions, said scammers were becoming increasingly sophisticated, with some setting up schemes and then not doing anything with them until they had built up some history and appeared more credible.

“Some scammers are putting money into investment returns and paying a return so people start [telling] their friends,” she said.

Snowdon added the pensions ombudsman had made it clear that cases where members had tried to transfer to suspicious schemes – successfully or not – would be judged on the basis of the guidance available at the time.

“If schemes follow the code available, they’re less likely to be found wanting by the ombudsman,” she said.

In addition, Snowdon said trustees should be careful to make sure they are providing members with all of the recommended information on liberation scams directly, rather than sending it via an adviser or other third party.