This is a submission to Government from someone who fell victim to a pension scam. The questions from Government are emboldened, otherwise I have left the statement as it was sent to me. It has been circulated with he intent that none of us let this happen to ourselves or people we know.
I am a 61 year old resident of Milton Keynes, UK.
In 2015 I unwittingly fell victim to a highly organised pension scam, operated in the UK and almost lost all of my pension fund (£415,000) when it was transferred to an offshore trustee (Malta) and invested in high risk, unregulated offshore funds via a Cayman Islands. To this day, they are still operating and transferring UK pensions.
After around 8 months of constant effort during 2016, I managed to recover 92% of the original capital and repatriated it back to a UK provider. However as well as losing 8% of the capital, I also lost any interest I could have earned had my pension not been transferred plus I incurred c. £3000 IFA costs in the repatriation.
I therefore feel particularly qualified to comment on some of the points requested by your enquiry. Whereas many comments you might receive will be from qualified industry specialists, I offer you true life, direct experience from my use of the pension freedoms and the consequences.
January 2015 is when I first learned of the new pensions freedoms being introduced in April 2015. As I am not in the best of health, it didn’t make sense to me to purchase an annuity and the new pension freedoms offered me an opportunity to use my pension in the most effective way and allow me to leave a decent legacy to my children. This seemed ideal.
I asked the ceding provider of my occupational pension in January 2015 if I could have a flexible drawdown instead of an annuity which was all they seemed to be offering me. They replied no. They said I would have to leave the scheme. So I decided to look for an adviser to help me leave the occupational scheme and transfer my pension so I could make use of the new pension freedoms come April 2015.
Scamming & Mis-selling
Are the Government and Financial Conduct Authority taking adequate steps to prevent scamming and mis-selling?
No. Most definitely not.
I was unaware of pension scams. I was ignorant of the consequences and loss of rights because of restrictions associated with the regulation of Financial Advisers.
My ceding provider, did not advise me to look at information on the Pension Regulator’s website concerning how to spot a pension scam. My ceding provider did not advise I should seek financial advice from an IFA, that had as a minimum, authorisation to give investment advice. Even when my ceding provider learned my pension was being transferred offshore (see their letter at the end of this document) they did not alert me to the possibility of a scam. I believed an “HMRC approved QROP” implied it was a bona fide trustee. I later discovered HMRC do not approve QROPS and the scammer and the Maltese trustee lied to me.
Recent headline grabbing announcements by Guy Opperman to legislate against cold calling will prove ineffective because it excludes those victims that unwittingly approach the scammers, ignorant of the fact they are scammers. By default the scammers give fraudulent statements in their advice and the vulnerable victim will still be conned.
Social media has already proved to be effective at targeting certain groups of people and influenced voting in national elections (e.g. USA). It is highly probable scammers will not cold call in the usual way but use social media to target and invite vulnerable individuals to contact them first. Mis-selling will continue.
There is existing legislation (FSMA 2000, section 238) banning any invitation to unsophisticated investors to participate in unregulated collective investments. The scammers are doing just that and the authorities are ignoring it. The scammers in my case operate with impunity out of London and Manchester and will continue to do so until such time as they believe they might get caught.
At least two of the actors in the scam are on official record for their participation in providing pension leads to another scam as long ago as 2012. Only now is that scam being investigated by the Serious Fraud Office. The scammers simply set up new companies and continue transferring pensions into their own unregulated Isle of Man domiciled fund.
I reported the scam to the FCA (May 2016) after I learned I was possibly a victim and all they did was confirm I probably was a victim of a scam. I also reported it to Action Fraud, on the advice of the FCA and Action Fraud have said they will not investigate it. The perpetrators are still operating their scam, openly, from offices in major UK cities with impunity. Even when informed and provided with hard evidence, the authorities do nothing to prevent the scam from continuing.
I compiled a significant body of narrative with compelling evidence of those who are directly contravening FSMA 2000 s.238 or are knowingly concerned with the contravention of FSMA 2000, s.238 but neither the FCA nor Action Fraud have shown any interest whatsoever.
In my experience the authorities are seeming to do absolutely nothing to prevent the scam or prosecute the scammers. This is the tale of many pension scam victims.
The very system designed to protect me from scammers failed me and when I reported it to the authorities, I was abandoned and the reason given to me was that the adviser transferring my pension was unregulated!
I informed the unregulated advisory firm (Square Mile) that I was going to report them to Action Fraud and they replied, in writing,
“That’s fine, Action Fraud are nobody and have no authority”.
Neither the Government, nor the FCA, nor Action Fraud are visibly taking any steps to prevent scamming and mis-selling and the victims are then abandoned when they report it to the authorities because the perpetrators are “unregulated”, the consequence of which is victims then discover they have lost significant rights and access to the FSCS.
The scammers will openly continue to flout the law and transfer people’s pensions into unregulated high risk investments because they can for as long as the FCA and Action Fraud demonstrate they have no teeth.
The statement by Guy Opperman on 20th August 2017:
“Today’s figures highlight the extent to which people’s savings are being targeted and stolen through elaborate hoaxes – leaving them with little opportunity to build up their savings again. That is why we are introducing tough new measures for those who scam.”,
acknowledges pensions are being stolen and given there is already adequate legislation to prosecute the perpetrators of the scams it is obvious that some prosecutions would deter the scammers rather than leaving them free to circumvent the “tough new measures” which they most certainly will.
The Government openly acknowledges
“ £43 million has also been unlawfully obtained by scammers since April 2014 “
so how many of those breaking the law have been prosecuted since 2014? None.
Instead of headline grabbing statements of “new measures”, how about reporting headline grabbing statements of successes prosecuting the perpetrators with “existing measures”? While the scammers go unpunished they will continue to be one step ahead of any “new measures” and will continue to find new ways of preying on vulnerable victims.
Is Pension Wise working? If not, how should it be reformed? Are there any implications for the proposed creation of a new single public financial guidance body?
Any and all information designed to inform a member of the public has value if and only if:-
a) The public are aware it exists and
b) It is easily accessible
I was unaware of pension scams until after my pension had been transferred to a Malta domiciled QROP (which I was fraudulently led to believe was HMRC approved) but I first suspected something was wrong when the trustee was unable to give me any accurate valuation of my pension months later.
Many victims are still unaware they face financial ruin as they are not accessing the information because it is not being brought to their attention. If you are unaware you’re being conned with fraudulent statements by unregulated advisers, you don’t go looking for information you don’t know exists. You don’t know what you don’t know.
Ceding providers should:-
- inform people of the characteristics of a scam especially when a request to transfer overseas is made
- either check the regulatory status of the firms requesting the transfer or advise their member not only how to check the status but also what the minimum permissions are, for giving investment advice and transferring pensions
- advise consequent loss of rights if the adviser does not have sufficient permissions
- advise that transferring pensions overseas does not come with immediate tax advantages
Advice & Guidance
Are people taking proportionate advice and guidance and if not, why not?
I believed I was taking proportionate advice from a regulated adviser at the time. The firm had an FCA registration number but I later learned, when I submitted a complaint to the FCA, this was restricted to insurance mediation and the firm was not authorised to give investment advice or transfer my pension. This “subtle” restriction meant nothing to me at the time and my ceding provider, although claiming I had received appropriate advice (their letter attached), did not warn me I might be involved in a scam. In fact when I challenged the ceding provider over their letter to the new trustee, they answered it was a standard letter and at the time the request was made they had no obligation to check whether I had received appropriate advice or not.
A direct result of this restriction in the regulatory status meant I could not access the Financial Compensation Scheme! A significant loss of my rights that I was completely unaware of at the time.
The point is, people are fraudulently told by scammers they are regulated; victims believe they are getting appropriate advice. Only later do they learn they have been lied to by the scammers and the consequences are disastrous.
I did not see the benefit in an annuity because of my health and my ceding provider said I could not access the new freedoms and have a flexible drawdown and said I would have to leave the scheme. This was the catalyst to being scammed. There was no advice from my ceding provider, no warnings – nothing – and I unwittingly fell into the hands of unscrupulous scammers. Victims do not “knowingly” give their money to a scammer, nor are they victims of excessive greed, nor are they “fools” as stated by Ros Altman! They are guilty of nothing more than ignorance of the technicalities of the regulations, pensions, investments and get lied to by unregulated advisers. It’s a very complicated subject and scammers prey on this ignorance. Like all confidence tricksters, they are experts at persuasion and lies.
The very system designed to protect me let me down, abandoned me and now denies me justice by refusing to prosecute those that “unlawfully obtained my pension”, to use Guy Opperman’s own words.
My recommendations are:-
- Ceding providers to advise their members of the dangers of scams and how to spot one before just handing over people’s pensions.
- Pension Wise mandatory before pensions are transferred.
- FCA/Action Fraud actually show some teeth, compassion and interest. Simply telling me I was probably a victim of a scam and then abandoning me was very stressful. Furthermore, Action Fraud not willing to show any interest in the huge body of narrative and telling me they were not going to investigate my complaint was a shock.
- FCA/Action Fraud to be more pro-active at prosecuting perpetrators.
- Maintain a “register” of known scammers and the investments associated with those scams. This can either be accessed by the public or the ceding provider before money is transferred out of a regulated provider to unregulated providers/funds.
Postscipt -Letter to pension provider dated 20 May 2015
Private and Confidential
Subject – Transfer from: x Pension Scheme
Member name: [witheld]
Our reference: Transfer Out – 10248769
Your reference: B00047
We have been advised by Pension & Life UK Ltd to proceed with the transfer of this member’s benefits from X Pension Scheme to X Retirement Benefit Scheme No 1.
We can confirm that the member has received appropriate independent advice in respect of the transfer to the receiving arrangement.
The total transfer value amounts to £xxx and has been paid direct to your bank account. The breakdown of this sum is as follows:
£ xxx is in respect of Additional Voluntary Contributions.
£ xxx is in respect of benefits accrued Pre 6 April 1997 cash value of the GMP.
£ xxx is in respect of benefits accrued Pre 6 April 1997 Non Contracted out benefits.
£ xxx is in respect of benefits accrued Post 5 April 1997 Contracted out benefits.
We enclose a copy of CA form for your record.
The Pension Scheme Tax Reference for the x Pension Scheme is [witheld].
Letter on behalf of Pension provider dated 20 May 2015
We are paying this transfer value on the understanding that the information given on the [withheld} -declaration by Overseas Arrangement form and any other information we have received in response to questions we raised is still factually correct. If any significant information has changed in the meantime, please return the payment.
Please note also that X Limited is acting solely in its capacity as administrators of the X Pension Scheme and is therefore not arranging any transactions in investments.