Millions of pounds are at risk from scams when funds are transferred between pensions, according to retirement experts.
The number of warning signs of a possible pension scam have increased to one in three cases from one in eight cases last year, research by XPS Pensions Group has revealed.
The firm’s scam busting team reckons that puts at least £73 million in danger of hi-jack by fraudsters.
The study also suggests that the pensions industry is getting better at spotting possible scams, especially when providers talk directly to their customers instead of middle-man advisers.
The key points of confusion for consumers – and the warning signs triggering fears of a possible scam – are fees involved in fund transfers; dealing with the adviser process and a lack of understanding about how a pension transfer works.
Fortunately for many retirement savers, although their transfer between schemes may set off an alert, most do not turn out to be scams.
The study suggests better communication between pension scheme managers and savers; anew law cracking down on cold-calling and tougher restrictions on who can run a pension scheme would all help reduce the risk of scams.
XPS Pensions Group principal Wayne Segers said: “Over the last year we have seen a big increase in the number of warning signs being identified for potential scam activity on pension transfers, from one in eight in June 2018 to one in three in June 2019.
“Fortunately, not all turn out to be scams, but it is good to see an increased understanding of the warning signs. Our scam identification team identified the red flags by speaking directly to members, which is a key part of the data gathering process.”
The industry has published a code of practice for pension professionals, but the Pension Scams Industry Group, a trade body set up to tackle fraudsters, wants more action.
PSIG chair Margaret Snowdon said: “The risk of pension scheme members being scammed increases as they are faced with more choice and the current laws do not help to protect them, in fact they cause further confusion. On average, members lose £91,000 of their pension savings through scams which can have a devastating impact on their later life.
“The revised Code of Good Practice published this week is another big step towards helping protect members, but they also need help to help themselves. An excellent way to reach them and help prevent the loss of further pension savings to scams is to talk to them directly about their transfers, as the scammers do.”
