Nicola Parish, Executive Director - Frontline Regulation, on what we're doing to help protect savers from scammers.
Introduction
Hello everyone; thank you for inviting me to speak.
We’ve heard today about financially vulnerable customers and what we can do to help them.
When it comes to pension scams, anyone with a pension pot is vulnerable. Scammers don’t target people based on vulnerability as you’ve discussed it. Our data shows that anyone can be targeted by scammers. People with small or large savings pots, those in defined benefit schemes and those in defined contribution schemes. People who might be deemed socially vulnerable and those who aren’t.
We work with organisations rather than individuals, so what I’m going to be speaking about might seem a bit distanced from the day-to-day experience of vulnerable individuals. Our role is to look at the environment in which those people exist. To think about the place savers find themselves in and the people who manage their savings.
From that perspective, vulnerability takes on a different meaning. Even those who think they are financially savvy are not immune to scams. In fact, there is some evidence to show that those who feel very confident with their finances may be particularly at risk of losing their savings to a scam.
We cannot fully protect savers unless the pensions industry works together - providers, regulators, administrators - we benefit from our combined efforts. And scammers suffer.
Quite often, once a scam has taken place, the money is gone and cannot be returned.
That’s why prevention is better than cure when it comes to tackling them.
Education is the best form of prevention. The tighter we pull together and share our knowledge, the better our chances of protecting savers from losing their savings.
There has been a lot of political and media attention focussed on scams recently and that’s a good thing. I’d like to build on that awareness and continue spreading the message, especially with an audience like you; in a perfect position to help prevent scams from happening in the first place.
The problem
Pension scams are devasting. A person can spend a lifetime carefully saving for their later years and lose it all in a moment. A pension scam doesn’t just steal money, it steals a person’s future. Their hopes and dreams of retirement. It steals the holidays, the home improvements, time with family.
The loss stays with that saver every day, in everything they do.
Research from Action Fraud shows individual victims are losing anything from under £1,000 up to half a million pounds.
Reported figures show that more than £30 million has been lost since 2017 to pension scams.
We know that the real figure is likely to be significantly higher, because so many scams go unreported. It’s embarrassing to admit you’ve fallen for a confidence trick.
The Police Foundation took data supplied by pension companies and found that, from a relatively small sample of 13 providers, £54 million of pension wealth was suspected to have been targeted by scammers in 2019.
Why are they unreported? Because in some cases victims are embarrassed to admit they have been taken in by scammers. And in some cases, because it’s not clear until years later that the victim has been scammed and lost their money.
The pandemic has brought more challenges - it’s brought economic uncertainty and fear. Hundreds of thousands of people have lost their jobs and many more are under severe financial pressure.
We do know that at difficult times like this, people are more at risk. We might just be starting to see what we witnessed following the 2008 financial crisis - we are beginning to see reports of an uptick in scamming activity.
So, we all need to be on high alert. Given this current economic situation, it’s even more important that we do all we can to prevent scams.
Scammers are constantly evolving, changing their tactics. To stay ahead of them, we need to continually educate ourselves and savers to understand their methods and what we can do to stop them.
I’ll mention briefly what The Pensions Regulator (TPR) is doing to prevent scams, and then I’d like to highlight three actions you can take to help.
What TPR is doing to prevent scams
TPR currently chairs Project Bloom; a multi-agency group, set up specifically to tackle scams.
We have encouraged the government to bring in a range of measures, including banning cold-calling about pensions, restricting the ability to transfer to scam schemes and changes to how certain schemes are regulated. We share information and intelligence and disrupt scams though education, prevention and enforcement.
We put people behind bars for pension fraud, we pursue illegal gains and we shut down scams where we find them.
The Work and Pensions Select Committee recently held an inquiry into pensions scams and published a report including a list of recommendations. I gave evidence at that enquiry along with some of our partners from Project Bloom and it was a very useful (if gruelling) experience.
The recommendations are fair and will, I think, help in our work. They include things like encouraging industry to share more data to try and fully identify the scale of the problem. Making it crystal clear about how to report scams. We are currently working through the recommendations.
What you can do to help prevent scams
There are three particular things you can do to help:
Firstly; get a broad understanding of the new Pension Schemes Act 2021.
On 11 February this year the Act was granted Royal Assent. Its purpose is to make pensions safer, better and greener. Included in the new legislation are rules designed to place restrictions on pension transfers, to help fight pension scams.
We expect DWP to consult on these changes soon. Please make sure you are aware of and understand what they mean for you.
We expect the regulations to include:
- more restrictions on members’ statutory rights to a transfer of benefits, and
- 'red flags' that enable trustees to refuse to transfer in certain situations
Given those two points, it’s important trustees ensure administrators implement new processes to meet new requirements for statutory transfers
Secondly, we’d like to you sign the scams pledge.
Industry has clearly taken action in recent years to help tackle scams.
The Pension Scams Industry Group (PSIG) produced a code of good practice for schemes and providers to help with their processes. This was excellent work and sets the gold standard for how to protect savers.
We want it to be the norm for providers, trustees, and administrators. Any company that works in this industry should adopt the principles of the PSIG Code of Good Practice by pledging to combat pension scams.
The Code is not law. TPR has no powers to enforce it or to punish those who decide not to adopt it. Which means we are relying on your sense of fairness and duty to do the right thing.
That’s why we launched the scams pledge.
You can help prevent pension scams happening to your members by pledging to combat pension scams and abiding by its principles.
So far, 241 schemes and organisations have pledged or have self-certified they meet the principles. Some of you I’m sure will be listening now, and I want to thank you for joining us.
For those who have not yet signed the pledge, I urge you to go to our website and see what you can do. It a very simple sign up process.
We want to support you as much as we can - so we have created a new ‘scams pledge hub’ that provides all the information you’ll need. Again, you can find it on our website.
We’ve also introduced a new Trustee Toolkit module which gives practical examples of good practice and due diligence. We will be holding webinars, promoting our digital handbook and we’ll have materials which you can use to help you communicate with your members. And you don’t have to be a trustee to benefit from this new module. It’s been specially developed to work for anyone.
One of the six principles of the pledge is for industry to report any concerns or suspected scams. This is really important - we want industry to step up in this area. To combat scams we need a clear understanding of the size of the problem and we need good intelligence, and that means we rely on you in the industry to report every suspected scam.
Every report made to Action Fraud helps the police get closer to those committing these crimes. In some cases it means the police can disrupt criminal activity very quickly, such as shutting down fraudulent websites and blocking telephone numbers.
For the avoidance of doubt - if you suspect a scam, please report it to Action Fraud.
The work we are doing to prevent scams from happening is so important to us, it sits at the very heart of what we do - protecting the saver.
That’s why we concentrate key resources to detect and prevent scams and pursue criminals who think they have got away with it. But there is much, much more to be done. And we can’t do it alone.
Thirdly; scammers are very smart when it comes to dreaming up new ways to separate people from their money. We’d like you in the pensions industry to be equally innovative, and front footed in finding ways of spotting scams and taking action.
This is not just the responsibility of regulators and law enforcers. The pace at which criminality advances, and the huge amounts of money at risk, demands we all act.
Scam prevention is a continuous battle and we need providers to keep their customers aware and alert. Publicity campaigns, direct messaging, education, information. We need you to keep your clients and customers alive to the risk of scams. To remind them of their vulnerability.
Conclusion
I feel deeply about pension scams. I’m proud of the work that we do at TPR and with our Project Bloom partners to help protect savers from the appalling actions of scammers.
But there is so much more to do. Scammers are smart. They adapt to changing circumstances and their tactics are changing constantly. They will exploit any opportunity, any vulnerability.
TPR and Project Bloom can’t beat scammers alone - we will only do this by working together.
So, let’s stay vigilant. Let’s continually educate ourselves. Let’s commit to working together to stamp out scams and protect savers.
