New law introduced to help protect pension savers from scammers
Between January and May 2021, pension scam losses totalling over £2.2 million were reported to Action Fraud.
Whilst all ages can be targeted, a YouGov poll found that one in five over 50s have been targeted by fraudsters. Men are often approached more by scammers who are aware that they have under saved for retirement and are keen to increase the size of their pension pot.
Fraudsters frequently offer ‘too good to be true’ incentives to pension savers, such as free pension reviews, early access to pension savings or get rich quick schemes. Lured in by these fake offers, individuals are then tricked into transferring their hard-earned money into a scam scheme and defrauded out of their savings.
New rules to help protect pension savers from these types of scams have now become law.
What does the new regulation mean?
Under the regulations, pension trustees and scheme managers will be given the power to intervene suspicious transfers before cash gets into the hands of fraudsters.
- Red flag: trustees and scheme managers will be able to prevent transfer requests if suspicious activity is suspected by giving it a ‘red flag’. If a red flag is present, the transfer cannot go ahead.
- Amber flag: Where fraud is suspected, trustees and scheme managers will be able to pause transfer requests by giving it an ‘amber flag’. In this scenario, the pension saver will need to prove they have taken scam specific guidance from the free Money and Pensions Service before the transfer can go ahead. This is the only way a transfer can then proceed.
These new regulations came into force on 30 November 2021.
Nicola Parish, The Pension Regulator’s (TPR) Executive Director of Frontline Regulation, said:
“We welcome these new regulations which further empower trustees to act as the first line of defence against scammers. We are pleased these new rules enshrine in legislation two of the key parts of the pledge to combat pension scams – around due diligence measures and issuing members warnings of high-risk transfers. We urge all trustees and pension providers to take note of these new rules and continue to play their part in stopping scams.“
What can you do to protect yourself?
- Reject unexpected pension offers that come through email, over the phone or on social media.
- Check to see if the firm you are dealing with is authorised by the FCA through the Financial Services Register or call them on 0800 111 6768.
- Don’t be rushed or pressured into making any decision about your pension.
- Consider seeking impartial information and advice.
The FCA ScamSmart website has more tips and resources on protecting yourself and your loved ones from pension and investment scams.
For further advice on avoiding financial scams or if you are concerned about a vulnerable person who may need assistance, please get in touch with our team on 01903 534587.