Why the messages on pension fraud need all of us!

We will never know the extend of fraudulent pension liberation (the type where people’s retirement savings are liberated to the fraudster’s bank accounts). People who are scammed tend to keep that information to themselves, consigning themselves to the mental torment that often leads to depression and worse.

The message from the City of London police, amplified in the Financial Times, is that in March we saw record amounts discovered to have been scammed , March was by a factor of 30% again, the worst month for scamming on record. The momentum is with the scammers and it is worth asking why – with the pension awareness policies in place – scamming continues to rise.

Let’s look at it four ways.

  1. Scamming is a cross-boundary problem – you can as easily be scammed from Switzerland as you can from Warrington.
  2. Scammers are more agile and nimble than regulators.
  3. No one ever went bust under-estimating the gullibility of the general public
  4. Transfer values are ridiculously high
  5. We don’t lock the door when we leave the house.

As the fourth point is cryptic- let’s start with that. If you operate an open-door policy to your stately home  then you will have many visitors and quite a few of your valuables will go missing. We have an open door policy on pensions and we encourage people to look at liberating their pensions for the cash equivalent. Most of the assets will remain with their legitimate owners but some will be liberated into the accounts of crooks.

This is the law of the land, this theft is factored in to the Government’s thinking as a certain level of pilfering is factored into the financial assumptions of the National Trust. The NT like the Treasury sees the greater good as served by having an open door policy.

Put another way, the political cost of closing the door is higher than that of keeping it open – I assume the reason for Jo Cumbo’s assertion;-

Tories fear an angry response if they tamper with pension policy

We need to remember the political dimension, pension freedoms are still too much a Tory vote-winner to slam the door shut (for now)


A cross-border issue

The recent ITV program on pension scams cited the use of overseas call-centres to get round Darren Cooke’s ban on pension cold calling in the UK. They needn’t have bothered, Darren’s cold calling ban got washed out of the Finance Act 2017 – another casualty of the snap election. But even if it was in place, the call centres can re-establish themselves in Switzerland, Gibraltar or outer Mongolia  as this blog shows.

In practice – digitally – “open door” means you can be looted from a distance.


Scammers are more agile than regulators

Our UK regulators are not good at bringing scammers to justice, not just because they’re not good, but because scammers are ingenious. The regulators, together with Action Fraud are no match for the likes of Steven Ward, as Angie Brooks points out http://pension-life.com/awts-next-challenge-negligent-ceding-providers-starting-lgps/.

Angie is also pointing out that the ceding schemes have been negligent in not conducting due-diligence on where the money is liberated to. A few years ago, I had a go at the Pensions Regulator for threatening trustees with sanctions if they allowed money to flow to scammers. The problem is that accountability sits with nobody and this is what the agile , nimble scammer exploits.


The gullibility of the public

We all now how easy it is to do stupid things under pressure. Scammers put people under pressure and people do stupid things like signing over their pension rights not just because they are gullible, but because they have difficulty dealing with hard pressure selling.

Fear is a key weapon of the scammers and the public are constantly being reminded by people who should know better, that they can fear for their pension benefits within the occupational pension framework. The scammers like nothing better than to quote those in pension authority as justification for scaring people out of their pension rights.

Once again, there are structural reasons for the increase in transfers. As we warn people about pension solvency, we promote the cause of the scammers.


Transfer values are far too high

I should rephrase this (some) CETVs are too high! The CETVs where the discount rate is close to 0% are reflecting the potential growth of assets within a scheme. If we choose to have no growth assets, we will have high CETVs which give scammers an even easier chance. I cannot of course change the way we de-risk our pensions because of scamming but I can point out that de-risking is adding to the structural problem that is helping the scammer.


Problems are structural and hard to change

The theme of this blog is that CETVs are vulnerable to scamming for structural reasons. The political imperative of  pension freedom , the financial reality of high CETVs, the advances in technology that make offshore cold-calling cost-effective, the lack of agility of Regulators (relative to the crooks) and the fundamentals of human behaviour means that scamming will always be with us.

But what we have that the scammers haven’t is right on our side. I don’t mean that as a caped crusader! I mean that 99% of people who see a scam will be disgusted (and the rest should be in prison).

We  have more that unites us than divides us and so long as we make scamming a social problem and awareness of it a social imperative, the scammers will remain marginalised and limited in their capacity to do harm. That is the best we can hope for.

We are not doing as well as we could and that is why we should be listening to Angie and Darren and Chris Lean and others in the front-line. We should listen and co-operate!

 


For a wonderful overview of the current state of play in scam-land, read Angie Brooks’ latest – a welcome present to AWT who hopefully will be taking Noo-Noo with him from Brighton.  http://pension-life.com/awts-next-challenge-negligent-ceding-providers-starting-lgps/

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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