July 5, 2020

Volume X, Number 187

July 03, 2020

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Lack of Data Impacts Efforts to Fight Pensions Scams

The Pensions Policy Institute (“Institute“) has said that a lack of comprehensive data on the number and scale of pensions scams, places limitations on the industry’s ability to effectively protect savers. According to the Institutevictims of pension scams [are] losing more than £80,000 on average.” There is growing concern from the Institute that during the COVID-19 pandemic, scammers will take advantage of uncertain financial issues and volatile markets more so than ever.

Background

The Institute has said that the nature of pensions’ scams changed after 2015, when freedoms were introduced by the Government that allowed savers to transfer their investments out of “gold-plated” defined benefit schemes (“DBS”). Since then, scams have increasingly focused on the transfer of benefits to pension arrangements that invest the money inappropriately.

Between 2018 – 2019, around 210,000 individual transfers took place from DBS, with a total value estimated at £34 billion. Interestingly, the number of ‘red flags’ raised over transfers from DB to defined contribution schemes increased from 13% in June 2018 to 34% in June 2019. However, the Institute states that this red flag analysis is not a guaranteed indicator that scams are on the rise.

The Institute also noted that although a ban on pensions related cold-calling was established in 2019, “a significant proportion of people are continuing to fall victim to pension scams“.

Data concerns

The Institute has observed that the available data about the number of scams taking place, as well as the amount lost in each scam, does not offer a comprehensive view of the true scale of the issue.

Two factors were reported as particularly impacting scams data. First, the lack of reporting by victims of pension scams. Secondly, there is a lack of an organised approach to data gathering. This means the data is not collected in a comparable and easily-aggregated way across the industry, which in turn hinders the ability to take a holistic view. The result is that the number of pension scams that take place in the UK and how much money is lost remains unknown.

According to Lauren Wilkinson, Senior Policy Researcher at the Institute, “gaps in data on scams make it difficult to assess the true scale of the impact and nature of scams taking place, and in turn this makes it more difficult for regulators and industry to enact improved procedures for protecting savers.”

In an effort to plug some of the gaps, in February 2020 the Pensions Scams Industry Group in cooperation with The Pensions Regulator and the Police Foundation produced a survey to investigate the scale of the problem. The results are expected to be available in the coming months.

Comment

 Despite the Government’s efforts, it seems that outlawing pension cold-calling is not enough to deter scammers. The scammers have simply evolved their practices – using new types of scams and different channels of contacting potential victims. Significant sums are being lost by victims of scams; it is therefore crucial to find a way to protect savers and improve the adequacy of their retirement income in later life. Policymakers need to better understand the nature of scams and how many people are being affected in order to take further action.

In the meantime, the Financial Conduct Authority has warned pension savers to be on the lookout for scammers trying to exploit anxieties over the Coronavirus pandemic. This warning should be heeded in these uncertain times, as scammers are taking advantage of economic instability, whilst individual savers are facing greater financial stress – thereby increasing the risk that those targeted will become victims.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 149

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About this Author

Garon Anthony Litigation Attorney Squire Patton Boggs Birmingham, UK
Partner

Garon is a partner in the Litigation Practice Group. He advises clients across the full range of commercial dispute issues, including cyber liability/data breach, professional negligence, banking, pensions and insurance.

Garon regularly acts for clients who are subject to investigations or disciplinary proceedings by national and international regulators, including most recently the Financial Conduct Authority, the Financial Reporting Council and the Dubai Financial Services Authority.

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Mariyam Harunah Debt Recovery Attorney Squire Patton Boggs
Associate

Mariyam regularly acts for a diverse client base, including, SMEs, FTSE 100 and 250 corporations, public bodies, developers, insurers and individuals.

Mariyam has experience advising on a wide-range of matters of both a contractual and tortious nature, including breach of contract, breach of warranty, misrepresentation, defamation, professional negligence, debt recovery and insurance.

Experience

  • Assisting on an approximately £160 million multi-action and multi-defendant claim following the sale of a company to investor clients.

  • Acting on a variety of disputes for clients seeking the recovery of unpaid monies owed pursuant to contract.

  • Acting on a portfolio of financial mis-selling claims for a leading international bank.

  • Advising a variety of clients upon termination of contract issues.

  • Acting for industrial manufacturers and suppliers in the defence of contractual and tortious disputes with technical complexities, arising out of the provision of allegedly defective products.

  • Assisting in the provision of bespoke and strategic advice to a national regulator dealing with persistent defamation and harassment.

  • Acting for a leading hire purchase provider in enforcement proceedings.

  • Assisting on a £500,000 negligence claim by a leading supermarket arising out of property damage and business interruption at one of its warehouses.

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