Pension transfer scams: what you need to know

Calum Guthrie-Cadge, a Solicitor in our pensions team, sets out some of the key steps that providers and trustees can take to help reduce the risk posed by pension transfer scammers.

9 July 2020

Pension scams have hit the headlines in recent years. Following the introduction of more flexible pension rules in 2015, scammers have increasingly looked to target the wealth that people may have tied up in their private pension arrangements. In response, the UK Government has introduced a ban on pensions cold-calling and there is now a raft of guidance and information available to the public.

Despite this, the evidence suggests many people are still risking their hard-earned retirement income for the lure of a lucrative investment return or early access to cash elsewhere. This article sets out some of the key steps that providers and trustees can take to help reduce the risk posed to individuals.

1. Follow guidance and industry codes of practice

There is now a wealth of information and guidance available for pension providers and trustees as to the diligence steps they should take before transferring a member’s benefits. Most notably, the Pensions Regulator maintains a webpage dedicated to pension scam avoidance measures. The Pension Scams Industry Group and the Pensions Administration Standards Association have also been involved in preparing their own codes of good practice for the industry.

We recommend that administrators and providers stay on top of the latest guidance and ensure that they implement it fully, if they have not already done so. This will help protect the member against the risk of a transfer scam and ensure that the scheme or provider is in a position to defend itself in the event of any future claim.

2. Monitor the market

While regulatory and industry guidance will be helpful, it should be remembered that scammers will often look to get ahead of the game by adopting new and innovative tactics. Understanding the current pension scam landscape is therefore essential. Providers and advisers should be encouraged to engage with this topic, and share any key trends they encounter or lessons they have learnt.

For some schemes, it may also be appropriate to monitor periodically the number of transfers taking place to help identify any suspicious patterns in terms of the receiving arrangement, the advising Independent Financial Advisers (IFAs) or the method of introduction or incentive used.

3. Seek advice and raise questions

In many cases, the individual will have a legal right to proceed with the transfer irrespective of concerns that this may be a scam. Ultimately, the question as to whether a particular transfer should proceed will need to be determined on a case-by-case basis and specialist legal input may be required in some instances.

It is also worth remembering that the legal checks carried out on a transfer are intended to protect and benefit the individual member. Where appropriate, therefore, the scheme or provider should seek to engage with the member directly in order to highlight their concerns regarding the transfer and seek further assurance or clarification. In doing so, however, the scheme or provider should be mindful of any criminal reporting obligations imposed upon them and the need to avoid ‘tipping off’ the potential scammers.

Our experience

Our pensions team has extensive experience advising trustees and providers on how best to prevent pension scams and how to deal with the consequences. For help with a pension scam query, please contact Calum Guthrie-Cadge or your usual Shepherd and Wedderburn contact.