Pension scams evolution since freedoms introduced
Pension savers have long been the targets of scams, but the current coronavirus pandemic is prompting scammers to up their game – leading researchers to consider the pension scams evolution since freedoms were introduced.
According to the Pensions Policy Institute (PPI), victims of these pension scams lose more than £80,000 on average.
However, with little data available about the scams, it can be hard to offer protection.
Scammers tend to target individuals and businesses during difficult times when financial stresses and volatile investment markets make us more vulnerable to approaches.
To help address this problem, the PPI is publishing a briefing note – How have scams evolved since the introduction of pension freedoms? – which explores the scam risks pension savers face.
The briefing note also looks at the barriers to improving the effectiveness of initiatives aimed at the protection of pension savings.
Pension freedoms were introduced in 2015, leading to a greater risk of scams as fraudsters could encourage individuals to withdraw money from the relative safety of their pension pots.
One significant measure introduced to protect pension savers from scams was a ban on pensions cold calling last year.
Despite this new law, a significant number of pension savers continue to fall victim to scams, especially as the nature of pension scams evolves.
Fraudsters are using new types of scams to convince savers to part with their hard-earned pension savings.
According to the PPI, the available data around pension scams does not offer a comprehensive view of the true scale of the issue.
They believe there are two factors that particularly impact scams data.
Firstly, that not all pension scams are reported by victims, and secondly, that the data that is available is not collected in a comparable and easily-aggregated way across the industry, which makes it hard to take a holistic view of the issue.
The best estimate of pension scams in 2018 saw victims each lose an average of £82,000.
Lauren Wilkinson, Senior Policy Researcher at the PPI, said:
Gaps in data on scams make it difficult to assess the true scale of the impact and nature of scams taking place, and in turn this makes it more difficult for regulators and industry to enact improved procedures for protecting savers.
Given how much is being lost on average by victims of pension scams, finding a way to better protect savers is vital to improving adequacy of retirement incomes in later life.
A better understanding of the nature of scams and how many people are being affected will help policymakers and industry to improve this process.
The Pension Scams Industry Group (PSIG) has this year carried out a survey with the Police Foundation to establish the scale of scam activity affecting pension scheme members, with data expected to be available in the coming months. PSIG’s previous pilot study in 2018 found that the information wasn’t readily available at an organisational level, although in some cases it was collected at a scheme level.
However, this is a step in the right direction and should hopefully shed more light on the scale of the problem.