If it’s too good to be true, it’s probably a scam
The PLSA’s James Walsh says clamping down on transfers to schemes with fewer than 100 members would stamp out pension fraud
Scams seem to be everywhere, from carbon credits to supermarket deals that aren’t actually deals to foreign lottery winners offering a share in their fortunes. As individuals we need to be vigilant and we need the government to help us tackle the wider issues.
The problem is big. Research by the Money Advice Service suggests that there could be as many as eight financial scam calls every second. With 30,000 Defined Contribution scheme transfers in 2015/2016 alone, representing £1bn of assets, the stake are high.
The Pensions and Lifetime Savings Association (PLSA) welcomed the government’s recent consultation on pension scams but believes that the proposals don’t go far enough. Ideas such as a ban on cold-calling and tougher regulation of Small Self-administered Schemes (SSAS) are a good start, but the government is not really addressing the central problem: being a registered pension schemes is no proof of being a legitimate pension scheme.
A much more ambitious approach to tackling pension scams is needed. PLSA members tell us the greatest risk of pension schemes being used as vehicles for scams comes from small and overseas schemes, generally schemes with 100 or fewer members. With this in mind, the PLSA proposes a new authorisation regime that focuses initially on all new schemes with fewer than 100 members, and existing schemes with fewer than 100 members that wish to receive pension transfers. This would cover SSASs and overseas schemes.
The new authorisation regime would include a legal requirement for smaller schemes that are new or wish to accept transfers to appoint an independent professional trustee with a duty to blow the whistle if they suspect a scam. Eventually a mandatory qualification should be introduced, based closely on the new requirements for trustees of master trusts. An alternative would be to require schemes to appoint a recognised professional, such as a lawyer or accountant.
To make it absolutely clear, under the PLSA’s proposals scheme members would only have a right to transfer to an authorised pension scheme, and no that scheme with fewer than 100 members would be allowed to accept transfers unless it has appointed an independent professional trustee.
Stopping rogue operators entering the market and tackling existing pension schemes that are used as a vehicle for scams is at the heart of the PLSA’s proposal. An authorisation regime would add another level of much needed protection for people against scammers. The PLSA will be doing its utmost to help the government get its policy right and give people real protection from pension scams.
James Walsh is policy lead for EU and international at the PLSA