If the government is going to put an end to pension fraud it will have to be bold
Stopping fraudsters from making off with pension scheme members’ savings is a fairly uncontroversial aim. But getting a handle on pension scams – ‘particularly liberation fraud’ has proved tricky.
As a government consultation on the subject closed last week Andrew Warwick-Thompson caused a bit of a stir when he put in his tuppence worth. The executive director of the Pensions Regulator set out three measures to “narrow the open goal” fraudsters currently face in a blog.
End cold-calling. Putting a stop to cold-calling has all round support, but Warwick Thompson wants to go further than that, banning unsolicited emails and texts.
No reputable pensions company is going cold call, text or email you
“This further step feels proportionate to me,” he writes. “Let’s face it, no reputable pensions company is going cold call, text or email you, are they?”
Set up a safe scheme list. The government proposes limiting the statutory right to transfer to schemes with a “genuine employment link” to prevent con artists setting up schemes simply to accept transfers. But Warwick-Thompson believes this test is often too complex.
Instead he suggests operating a ‘safe list’ of approved schemes. But rather than extending this to all 40,000-odd schemes under TPR’s jurisdiction, he favours limiting the list to authorized mastertrusts, or FCA-regulated vehicles such like group personal pensions and self-invested personal pensions (SIPPs).
It answers the legitimate calls to drastically reduce the cost of due diligence
“That’s clean and simple, it answers the legitimate calls from trustees and scheme managers to drastically reduce the cost of due diligence,” he explains.
Ban SSAS transfers. The most draconian proposal is to ban all transfers to small self-administered schemes (SSAS) and to stop any new ones from being set up. Tough measures, but the figures show just how hard these vehicles are to police: TPR has 21,000 registered with it, while government estimates there are a further 750,000 single-member schemes (which are not required to register).
These are easy to set up and exempt from member protection and reporting requirements of larger schemes, which Warwick-Thompson says make them attractive to criminals.
SIPP and SSAS providers were outraged by the “extreme” proposal. Respondents to the government consultation have suggested less heavy handed options to tighten up regulation, including mandating that SSAS have a professional trustee, or giving TPR the power to regulate them.
TPR is justifiably keen for consolidation to reduce the number of schemes it oversees
But given that anyone can set up as a professional trustee would this really give any guarantees? And TPR is justifiably keen for consolidation to reduce the number of schemes it oversees, so potentially adding hundreds of thousands of single-member vehicles seems like a non-starter.
If the government is serious about consumer protection, it is going to have to risk upsetting a few people.