Stop blaming freedom (for pension scamming)!

There are many things that pension freedoms have brought us and one of them is the pail of hogwash that they’ve opened the door to pension scams. This is the  line peddled by the FCA’s new CEO Nikhil Rathi at the Treasury Select Committee and it needs to be challenged.

So long as people have more money than sensible support , the scammer will have an opportunity. Most people have (for them) a lot of money in pensions and they have very little support about what to do with it.

Pension Liberation scams, which abounded in the first decade of the century happened because there were no pension freedoms, people had money they considered locked away from them, scammers showed them false hope that they could “take back control” of their money. The flip side was that there was no-one saying “don’t to it”.

When Manita Kuller allowed her money to be transferred to a Guernsey Qrops by a Thai adviser, the money was signed off by the Trustees of the Unilever and Ogilvy & Mather pension plans. When Sue Flood transferred her pension to Ark it was signed off by the Trustees of the BBC pension plan. These transfers happened because scammers convinced their clients they could unlock their client’s money.

Now let’s look at where scammers are succeeding. They are not stealing money from their client’s pension accounts, they don’t need to. They are simply swapping conventional investments which people don’t understand to investments in the kind of tangible assets that people do.

People get investment in Store Pods, Car Parks, residential property even such exotica as Brazilian rain forests. These investments are sold as environmentally friendly, having social purpose and offering sustainable value. They are doing what pension liberation was doing, offering an easy and affordable way for people to “do the right thing”.

The line taken in Port Talbot had nothing to do with pension freedoms, it played to the steelworkers worst fears , that their employer was not fit and proper to pay their pensions. Not one steelworker I spoke to mentioned that they wanted to exercise pension freedoms, they simply wanted to take control of money that they feared was at risk from their employer’s incompetence or malpractice.

Confusing messaging from the FCA?

Fractional scamming

It is convenient for the FCA to hide behind the smoke from pension freedoms, but the steelworkers were let down because they could not get support.  The Trustees of BSPS did not want to be seen to offer members advice and steelworkers who asked for advice were often directed by MAS (among others) to Darren Reynolds, scammer in chief who was the only IFA on MAS’ website listed as working in Port Talbot.

The FCA have to accept that it is not pension freedoms which are the problem, the problem is the availability to scammers of large sums of money which can be accessed legitimately. This process I have labelled “fractional scamming” and is best explained by the chosen vehicle of Darren Reynolds and Active Wealth Management. Every link in the chain between Reynolds and the asset managers that sat behind Newscape were known to and indeed registered with the FCA. They included organizations run by  individuals who had recently run failed investments and their compliance was maintained by an organization with a history of  questionable dealings. Collectively these organizations were ruinous to steelworker’s finances but individually they all stood up to FCA scrutiny.

The only way that you can cut off the availability of client funds to organisations such as Active Wealth Management was to stop access to their advice for free. It took nearly three years between the Time to Choose and the introduction of the ban on contingent charging. Compare this to the speed at which Government acts on the pandemic and you must ask whether the FCA has been effective.

Open Pensions – the next scapegoat?

Having spent five years observing the impact of pension freedoms and mistakenly blaming them for ongoing pension scamming, we are now in danger of creating a new scapegoat.

Speaking to Corporate Adviser in July, Baroness Jeannie Drake linked the availability of data to opportunities for scammers.

“There are big questions about verification and security around a person’s ID. It will be the state mandating access to the data – this is not like open banking, it is different. There are vulnerable customers. Issues such as how do you stop scamming and misselling,”

These comments also need challenging. When it comes to money we are all “vulnerable customers” because those who hold our money know so much more about it (and us) than we know about our money (and them). The point of open pensions is to create a symmetry of information so that ordinary people can work out what is going on.

The pension dashboard is being delayed because of a fear that it will give scammers opportunities that would not be available if data was in lockdown. This is simply extending the paranoia of the FCA about pension freedoms to a paranoia within parts of Westminster about  pension data.

What data we do have about pension scamming suggests that the average scam loses individuals £82,000. The average amount people accumulate at retirement is less than half that. Pension scammers are selective and they do not target small pots. There is no evidence that scammers target pension data and a lot of evidence that they access their customers through lead generation. The science of lead generation is based on targeting larger pots.

The capacity of lead generators to be successful is greatly enhanced by the lack of support for Middle Britain who have no access to the kind of advice and guidance they need to take sensible financial decisions. Ironically, for this kind of service to develop, we need the open pensions and – the pension dashboard, which Jeannie Drake and others see as the problem.

Freedom is not the problem

When the pension freedoms were introduced in the 2014 budget, the big idea was that they would be supported by Pension Wise, originally billed as an advice service and subsequently promoted as universal access to guidance for those in the retirement zone.

The dashboard was and is an adjunct to that support and it was expected to be in place by 2019. We have yet to have a timeline for the delivery of the dashboard. Those who are obstructing the progress of the dashboard legislation in the Pension Schemes Bill, need to balance their worries about pension data with a proper concern for those who are being denied the information needed for them to take decisions.

Neither the FCA nor the House of Lords should confuse freedom of information with the opportunity to scam. The facts speak to a different truth; the more we deny freedom, the easier it is for scammers to operate.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to Stop blaming freedom (for pension scamming)!

  1. Brian G says:

    Really strong points Henry. The reason Darren Reynolds was able to sell the funds he did is primarily down to the failure of Darren Reynolds to abide by his duty to act as the agent of his clients. Elsewhere fee based financial advice is simply offered at too high a price for the average person in the street to understand the value of paying for it. Therefore they never experience its value so never know what they are missing. The FCA have forced fees sky high by their misplaced zealotry in regulating advice in a way that opens the door for unregulated Scammers to peddle their investment filth. Scammers are basically con artists who misrepresent opportunities and outright lie to trusting people looking for a way of improving their lot. If the cost of receiving regulated advice is too high unregulated scum will take their place. A mass campaign of education and information is required to call out these schemes and techniques. And when people are caught scamming they need to be prosecuted. Phoenixing of perpetrators is an area where the regulators fail miserably. Action Fraud is not given sufficient resources to take action. And HMRC should give scam victims the benefit of the doubt when cruelly imposing 55% tax penalties on ignorant customers. Maybe they should turn their harsh gaze on their own procedures that allowed SSAS schemes to be set up by newly formed non trading companies. Con artists will follow the money and will look for easy ways of gifting. FCA HMRC and legislators have created the environment where Scammers can prosper.

  2. John Mather says:

    There is no New Model for adviser. It’s like Brexit, a box with a label that no one has opened. The cost of being regulated is excessive driving advisers up market to where costs can be recovered/justified. The most successful model in the market today is the SJP model where the income is taken in the same style as Hambro Life it’s no longer called commission but spades look like spades no matter what you call them. It works but is not competitive up market. It looks like direct sales forces will make a comeback at some stage and a maximum commission agreement will return. Building the cost of advice into the product makes sense for the mobile phone business and others why not for financial advice?

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