Margaret Snowden

Key findings:

1. Information on scams is not readily available at an organisational level

2. The Scams Code is seen as a good basis for due diligence

3. Significant time and effort goes into protecting members from scams

4. The more detailed the due diligence, the more suspicious traits are identified

5. SIPPS (including international SIPPS) are the vehicle of choice by scammers

6. Quality of adviser tops the list of practitioner concerns, with member awareness a close second

7. Sharing of intelligence would help avoid duplication of effort

The industry body, led by Margaret Snowden has carried out  a pilot survey among three providers – Phoenix Life, Standard Life and XPS Pensions Group – throughout 2018. Snowden points out that the survey is not in itself statistically significant. However it confirms what seasoned scam watchers such as Angie Brooks and Al Rush have been telling us.

The threat is from within rather than without.

We shouldn’t be surprised that  the Pension Scams Industry Group (PSIG) has found most of pension scams identified were carried out by “advisers”

Problems on the sell side

The survey found 52 per cent of due diligences cases that were carried out due to suspicions of a transfer being a scam involved an unregulated introducer, an adviser in a different country from the member, or an adviser who appeared on an internal watch list because of previous concerns.

Problems on the buy side

Another significant concern was member awareness of advice, PSIG stated, after if found in almost half (49 per cent) of cases the member had limited understanding or appeared to be unaware who was providing the advice, the fees being charged, or the receiving scheme to which the transfer would be made.

The days of the boiler room are over

The report points out that the world of on and offshore call centres targeting pensions is dwindling.

“The number of transfers originating from a cold call amounted to only 6 per cent, whilst the number of suspicious cases involving unregulated advisers or introducers was far higher”

Scammers have moved on

I am regularly sent articles to publish on my blog from the people who appear on my internal watch list (passed to me by Brookes and others). One of the scammer’s favorite tactics is to dress themselves up as scamming vigilante. Under this cloak of righteousness they carry out the very crimes they warn their readers to avoid.

As Snowden points out

“This shows that our efforts to convince individuals about the dangers of scams cannot simply focus on the cold-calling ban, as perpetrators are already using other means of contact – like email and online advertising, as well as word of mouth and factory-gating.”

Fractional scamming

PSIG found about 20 per cent of red flags identified by schemes related to the terms of the transfer including investment returns, guarantees made or the ability to access funds.

Regarding the destination of the transferred funds, self-invested personal pension (Sipp) providers, including international firms, account for 95 per cent of the transfer requests.

Of the remaining transfers about 3 per cent of trust-based transfers were made to authorised occupational pension schemes, while 2 per cent of payments were made to a qualifying recognised overseas pension scheme (Qrops).

The bewildering complexity of the pension choices available through global jurisdictions means that scammers can legitimise their behaviours through dextrous exploitation of “fractional scamming”.

Typically, what appears a straightforward investment, involves numerous agreements within the pension contract – none of which is illegitimate but – taken in totality – amount to a scam.

Using a regulated entity as a front

Snowdon also noted the survey had shown that “the more in-depth due diligence undertaken by administrators where a request has been made, the greater the likelihood of finding red flags”.

This is  greater due diligence leads to greater awareness. However, unless that awareness can be used to turn red flags into scam prevention, then little good can come of all the hard work.

My experience talking with the administrators of Defined Benefit Schemes and with the managers of the SIPPs which receive the money is one of frustration. It is as hard to refuse money from an authorised adviser as to prevent the authorised adviser taking money through a CETV.

Since the scammers operate with a retinue of lawyers, attempts to block the flow of money are typically met with threats of defamation suits. It takes a certain amount of courage to refuse to pay out or accept transfers.

Let’s hope that the frustration of the people I talk to is eased by greater empowerment from both the FCA and tPR, to just say no.

Thank goodness for Snowden

We should be very grateful for this survey and the report produced by PSIG. It provides useful information which trustees and their administrators can act on. Margaret Snowden is a non-executive board members of the Pensions Regulator and the work she does gets noticed.

We should also be grateful to Standard Life, Phoenix and XPS.

While I am not surprised by the findings of her research, I am pleased to see it validates the work of Brooks, Rush , Lean , Cooke and many other guardians of the public interest and adviser’s reputations.

Here again are the takeaways of the report