Clampdown on social media pension scammers
The ‘pension transfer regulations’ will introduce a new red and amber flag system when pension transfer requests are made. A consultation on the measures starts today, with responses due by 9 June 2021.
Pension scams have increased since pension freedoms were introduced in 2015. Under the plans, suspicious requests could be stopped if pensions savers have been approached to access or transfer their savings uninvited via social media.
Such unsolicited contact would trigger a ‘red flag’ which would mean pension trustees or scheme managers could block a transfer request.
Many scammers use social media and other online channels to offer people incentives such as free pension reviews, early access to their money, or time limited offers. Lured by these attractive offers, people are coerced into transferring their savings into a scam scheme designed to fleece them of their savings.
Minister for pensions Guy Opperman said: “Pension scammers are the lowest of the low, and with the growth in recent years of online scams we must act now to curb them.
“Our new regulations will build a strong, first line of defence in the fight against pension fraud – helping stop these crooks from making off with people’s hard-earned savings.”
The Pension Scams Industry Group estimates 5% of all transfer requests give trustees and scheme managers cause for concern.
Red and amber flags
The proposed regulations, published today, will introduce a new red and amber flag system. These will allow for transfers to be prevented or paused whilst the member takes guidance about the possibility of scams.
The ‘red flags’ and ‘amber flags’ are triggered when one, or a combination, of a specific set of circumstances are present and indicate fraudulent activity.
A red flag will give the trustee the power to block the transfer, while an amber flag allows them to block the transfer until the member provides evidence they have taken specific transfer scams guidance.
The presence of these flags could be determined based on the individual’s response to a range of standardised questions, including:
* Did someone advise or recommend that you consider a pension transfer?
* Were you initially approached by email, text, phone call, letter or through social media?
* Who contacted you and how do you know them?
* Was it someone offering independent advice or someone representing a firm that contacted you?
* Are you aware of how your money will be used/invested?
* Are any of your investments subject to an exit penalty if you wish to access or transfer the investments within an agreed period of time (for example within five or 10 years)?
* Do you know what the costs and charges are for your new arrangement?
* Are you working with an adviser or firm based outside the UK?
Andrew Tully, technical director at Canada Life, said: “Pension scams are a scourge of society and it has been well documented how big the problem is. Behind the numbers are very personal stories and every one of them is saddening to hear about. So it makes sense to introduce further measures to protect people from scams. However, these ideas focus on the under 55 age group pre-pension freedoms. There are only a few scams which affect transfers before age 55, as most people know there are only very limited circumstances where you can access your money legally pre 55.
“Scammers instead target customers who are age 55 plus when people can legitimately access their funds and these measures will unfortunately do nothing to prevent that. The old adage still applies, buyer beware and if it looks too good to be true, it inevitably is. Simply walk away, delete the email or hang up if you are contacted out of the blue.
“We also have to be careful that any measures introduced don’t cause undue delays in people being able to transfer their pension benefits from one scheme to another. The industry has worked hard to get transfer turnaround times down and it wouldn’t be good if any new measures caused that to go into reverse.”