Regulator: We're stepping up the fight against scams that have shattered lives

The deals often carry a veneer of legitimacy and can be highly persuasive. They may mention ‘legal loopholes’, ‘cash incentives’ and ‘overseas investments’ – but frequently fail to transparently explain the tax rules that say if people access their pension before they are 55, they will normally have to pay a tax charge, effectively to repay the tax relief they received. 

The regulator is taking action in the courts to prevent the spread of new models as they appear

This tax charge can be up to 55 per cent of the original fund. While some people do understand what they are getting into, others do not appreciate the risks they are running.

For example, we know of one victim who risks losing her home because she was not told that she could be liable for tax and unauthorised payment charges, and of another who took his own life after he transferred his pension pot but the promised lump sum did not come through. 

It is stories like these that make it all the more important that we continue to take action to educate people about the dangers of pension scams. 

That is why, as part of a new cross-government campaign, the Pensions Regulator has updated its scorpion-branded guidance to make the material clearer and harder-hitting, both for consumers and those working in the pensions and financial sectors.

We want retirement savers, particularly those with limited financial knowledge, to be in a better position to protect themselves by recognising the hallmarks of a pension scam. Our message to them is check the facts before you make an irreversible decision – a lifetime’s savings could be lost in a moment.

We know of one victim who risks losing her home because she was not told that she could be liable for tax and unauthorised payment charges

We want all pension professionals to be aware of the threat of pension scams and carry out due diligence when processing transfer requests.

Disruption has proved effective at the points of transfer and we urge pension trustees, administrators and providers to include the new-look scorpion material in the annual statements sent to members, and to anyone who requests a transfer in the meantime.

Progress is being made in other areas. HM Revenue & Customs has strengthened its registration process to prevent new schemes being set up to facilitate scams, City of London Police has carried out raids and arrests at a number of call centres across the country, while the National Crime Agency has successfully taken down pension scam websites.

Meanwhile, the regulator has appointed independent trustees in dozens of cases to take control of suspect schemes and is taking action in the courts to prevent the spread of new models as they appear, including using our powers to secure scheme assets.

Many of our cases are ongoing, but where we are able, we will use our powers to publish information on concluded case investigations.

There is no silver bullet to halt this activity, save preventing transfers altogether, which is clearly undesirable. It is only through coordinated action by everyone involved in pensions – including the behaviour of retirement savers themselves – that we will begin to stamp out pension scams.

Andrew Warwick-Thompson is executive director for defined contribution, governance and administration at the Pensions Regulator