Recommendations & Conclusions
37 items
1
Conclusion
Fifth report: Protecting pension savers…
People save for retirement and later life in many different ways, not solely through their pensions. During the course of our inquiry we have been contacted by a number of people who have lost savings, other than pensions, which were intended to support them in retirement.
Government response. The Department for Work and Pensions (DWP) and HM Treasury already work collaboratively on these issues, including through Project Bloom, and recognise the importance of doing so to address the vulnerabilities the fraudsters exploit. This joined-up approach also recognises the …
Department for Work and Pensions
2
Conclusion
Fifth report: Protecting pension savers…
The pension freedoms gave people more choice in how they use their money to meet their own needs. However, by offering pension savers access to a much wider range of investments, the freedoms also removed much of the distinction between pension scams and other types of investment and financial fraud. …
Government response. Both the Government and Project Bloom members recognise the difficulty in determining the scale of pension scams and the barrier this creates in effectively tackling the problem. We accept the Committee’s observation that the real scale of pension scams is …
Department for Work and Pensions
3
Recommendation
Fifth report: Protecting pension savers…
We recommend that DWP should publish details of its plans to co-ordinate work with the Treasury to combat pension scams as a matter of urgency. Following the introduction of the pension freedoms there is now less practical distinction between the areas of Treasury responsibility, including investments and advice, and DWP’s …
Government response. The existing Pension Scams Industry Group definition was developed by Project Bloom in 2016 following consultation with all partners. Pension scams can be particularly harmful due to the impact on people’s retirement provision for later life. The definition focuses on …
Department for Work and Pensions
4
Conclusion
Fifth report: Protecting pension savers…
The real scale of pension scamming is undoubtedly much larger than the £30 million reported to Action Fraud, the UK’s national reporting centre for fraud and cybercrime, between 2017 and August 2020. We have even heard examples of individual cases with losses potentially larger than the total amount reported to …
Government response. The City of London Police (CoLP) are the National Lead Force for fraud, and responsible for the delivery of the Action Fraud Service. They are an active member of Project Bloom and report into them on a regular basis. The …
Department for Work and Pensions
5
Recommendation
Fifth report: Protecting pension savers…
We recommend that Project Bloom, the multi-agency taskforce set up to tackle pension scams, should develop a range of measures to enable a better understanding of the scale of pension scamming, rather than relying solely on the current Action Fraud data. The lack of a definitive measure of the scale …
Government response. Action Fraud is the national reporting service for fraud and cybercrime. Reports are submitted, considered by the National Fraud Intelligence Bureau, and disseminated to forces for investigation where there is a viable line of enquiry. These reports come direct from …
Department for Work and Pensions
6
Recommendation
Fifth report: Protecting pension savers…
At present there is no universal definition of pension scams and the range of potential activity which could be classed as a scam runs from sharp practice all the way to outright fraud. Project Bloom, the multi-agency taskforce set up to tackle pension scams, uses a broad definition of pension …
Government response. We agree the issue of secondary scammers awareness must be increased and it is an important issue. The Money and Pensions Service also provide guidance on secondary scammers. The Pensions Regulator and the Financial Conduct Authority will further consider communications …
Department for Work and Pensions
7
Recommendation
Fifth report: Protecting pension savers…
Many victims of pension scams never report that they have been scammed. Others report a long time after it has taken place. Scam victims reasonably expect that, when they make a report to Action Fraud, it will be acted upon. They are understandably left disillusioned when this does not happen. …
Government response. The Government continues to stress the importance of reporting instances of fraud to Action Fraud, both to support police investigations as well as allowing the development of a stronger intelligence picture across a range of threats. Action Fraud also makes …
Department for Work and Pensions
8
Recommendation
Fifth report: Protecting pension savers…
The aftermath of a pension scam can leave a victim needing to deal with several different bodies without much guidance or support. For many victims Action Fraud is the first point of contact and for those for whom it is not, it should be. We recommend that Action Fraud should …
Government response. Project Bloom is exploring options for improved coordination of industry intelligence via its National Economic Crime Centre led Intel & Ops Group. We are also emphasising the need for increased industry reporting to Action Fraud via The Pensions Regulator-led Pledge …
Department for Work and Pensions
9
Recommendation
Fifth report: Protecting pension savers…
We heard repeatedly about a worrying trend of secondary scammers—scammers targeting people who have already been the victim of a pension scam. People who have not reported their case to an appropriate body—or who have done so but not received appropriate warnings—may be unaware of the risk that secondary scammers …
Government response. The Pensions Regulator (TPR) launched the industry-focused Pledge campaign, working closely with the Pension Scams Industry Group (PSIG) in November 2020. It encourages industry to make a public pledge to combat pension scams and to adopt the recently updated PSIG …
Department for Work and Pensions
10
Recommendation
Fifth report: Protecting pension savers…
Pension firms can and should report suspect scams directly to Action Fraud. But we heard extensive evidence from the pensions industry that they are not sure where or how to report pension scams or suspected scams and that they are in fact sometimes discouraged from doing so. Action Fraud’s own …
Government response. We agree that expatriates should be able to make use of the services provided by the Money and Pensions Services (MaPS) and are aware that scammers do target those with overseas savings as well. MaPS services are already available to …
Department for Work and Pensions
11
Conclusion
Fifth report: Protecting pension savers…
The pensions industry does not universally share information about possible scams amongst providers and schemes. Information can be, and is, shared voluntarily, including through the Pension Scams Industry Group and the forum it supports— the Pension Scams Industry Forum. WWee rreeccoommmmeenndd tthhaatt PPrroojjeecctt BBlloooomm sshhoouulldd ffaacciilliittaattee iinndduussttrryy iinntteelllliiggeennccee sshhaarriinngg aanndd …
Government response. The Government agrees with this recommendation and it fits within the plans of the Department for Work and Pensions (DWP) to review the policy. Scams are ever evolving and DWP recognises the importance of making sure the legislation is effective …
Department for Work and Pensions
12
Recommendation
Fifth report: Protecting pension savers…
We welcome the fact that the Pensions Regulator is supporting efforts to encourage the pensions industry to share information about pension scams through its pledge to combat pension scams campaign, which was launched in November 2020. We would like to see all of the pensions industry sign the pledge. We …
Government response. The Government agrees with this recommendation, and it will form part of the Department for Work and Pension’s plan to review the policy (see response to Recommendation 11).
Department for Work and Pensions
13
Recommendation
Fifth report: Protecting pension savers…
Pension scammers do not confine themselves to the borders of the UK. Many of the cases we heard about took place across several countries, making enforcement more complicated. We note that since the introduction of a potential 25% charge on many qualifying recognised overseas pension schemes transfers in March 2017, …
Government response. The powers in the Pension Schemes Act 2021 allow the Secretary of State to set conditions, but it does not give powers to use a third parties list or determination. The Financial Conduct Authority’s (FCA) warning list can only be …
Department for Work and Pensions
14
Recommendation
Fifth report: Protecting pension savers…
The Pension Schemes Act 2021 will allow people’s statutory right to transfer from their pension scheme to be restricted where there are signs of a pension scam. Regulations will be developed by DWP and are expected to be in place later this year. This will be a significant step in …
Government response. The Government believes that it is important that online platform operators take responsibility for the financial promotions they pass on. As part of our departure from the European Union (EU), the Government removed an exemption to the financial promotions regime …
Department for Work and Pensions
15
Recommendation
Fifth report: Protecting pension savers…
The regulations will identify potential indicators of a pension scam which would raise either red or amber flags. A red flag would allow a transfer to be blocked and an amber flag would allow a transfer to be paused until a person has received appropriate guidance. The red and amber …
Government response. The Government has recently announced that, following close engagement with a broad range of stakeholders, online fraud will be included in scope of the Online Safety Bill. This means that companies in scope of regulation will need to take action …
Department for Work and Pensions
16
Recommendation
Fifth report: Protecting pension savers…
The FCA hosts a warning list on its website. The warning list publishes details of unregulated entities which appear to be carrying out an FCA regulated activity without the requisite authorisation or permission. The Minister for Pensions and Financial Inclusion told us that the powers under section 125 of the …
Government response. The Home Office and the Department for Digital, Culture, Media and Sport (DCMS) continue to work with the tech sector to explore voluntary approaches to reducing fraud together, including a public-private technology sector charter. Such a Responses to the Committee’s …
Department for Work and Pensions
17
Recommendation
Fifth report: Protecting pension savers…
The move online by pension scammers has been a recurring theme of our inquiry. Regulators appear powerless to hold online firms to account for hosting scam advertisements in the same way they would be able to for traditional media. Scammers using paid-for online advertisements appear to be particularly hard to …
Government response. We believe that education will always be one of the most effective weapons against scammers. It would be far tougher for scammers to succeed if individuals can spot a scam and do not hand over their hard-earned retirement savings in …
Department for Work and Pensions
18
Recommendation
Fifth report: Protecting pension savers…
On 15 December 2020 the Government announced its decision to bring forward legislation for the Online Safety Bill but also signalled its intent to exclude financial harms from the scope of that legislation. It is notable that several public bodies, including the Financial Conduct Authority and National Economic Crime Centre, …
Government response. Pension Wise appointments are used to help people understand their options when accessing a Defined Contribution pension. While the appointment 14 Responses to the Committee’s Fifth Report of Session 2019–21 does have a section on identifying scams, its primary aim …
Department for Work and Pensions
19
Recommendation
Fifth report: Protecting pension savers…
In the period between now and any legislation coming into force, we recommend that voluntary codes of conduct should be developed by search engines and social networks which make it clear that a request from a UK-based regulator is sufficient to remove a scam advertisement.
Government response. Under the Financial Guidance and Claims Act 2018, the Money and Pensions Service (MaPS) was established as a corporate body with functions relating to financial guidance. The legislation clearly sets out the separate functions of the Service. It is not …
Department for Work and Pensions
20
Recommendation
Fifth report: Protecting pension savers…
Since 2014, the FCA and the Pensions Regulator have been running ScamSmart campaigns to alert people to the risks of scams. The campaigns have made effective use of limited resources to target groups vulnerable to scams. We recommend that Pensions Regulator and FCA should continue to run the ScamSmart campaign, …
Government response. The Government’s consultation in February 2017 on the Pension Advice Allowance2 explains the rationale for introducing limits to the amount that pension scheme members can withdraw under the allowance. 2 https://www.gov.uk/government/consultations/introducing-a-pensions-advice-allowance/introducing-a- pensions- advice-allowance-consultation Responses to the Committee’s Fifth Report of …
Department for Work and Pensions
21
Conclusion
Fifth report: Protecting pension savers…
When someone is looking for support to help them make a decision about their pension they can seek either advice or guidance. These are both important tools to prevent scams, with earlier intervention likely to lead to better outcomes. Advice is a personalised recommendation which can only be provided by …
Government response. The Government and Project Bloom members agree that a publicly available description of its members and their respective roles and responsibilities would be a beneficial next step, and this is an action from its recently completed review – this will …
Department for Work and Pensions
22
Recommendation
Fifth report: Protecting pension savers…
When the pension freedoms were introduced, a guidance guarantee was presented as a key pillar of the reforms supporting people making use of the new range of choices available to them. Everyone with a defined contribution pension is entitled to free impartial guidance from Pension Wise when they come to …
Government response. The Financial Conduct Authority seeks to reduce the incidence of fraud through a framework of prepare, prevent, protect and pursue. They collaborate extensively with other agencies, including as one of the seven core National Economic Crime Centre partners. They have …
Department for Work and Pensions
23
Recommendation
Fifth report: Protecting pension savers…
We recommend that the Department for Work and Pensions should consider the options available for the Money and Pensions Service to offer enhanced guidance or limited advice, including through technological solutions. Regulated advice comes at a cost to savers, which can be a barrier for many, whereas the guidance currently …
Government response. Pension schemes that wish to benefit from pension tax relief are required to register. Her Majesty’s Revenue & Customs (HMRC) has responsibility for registering pension schemes to protect the exchequer in respect of the significant value this relief represents. In …
Department for Work and Pensions
24
Recommendation
Fifth report: Protecting pension savers…
The pension advice allowance allows members of defined contribution and hybrid pension schemes to withdraw £500 from their pension up to three times in different tax years for advice. There appears to have been little take up of the Pension Advice Allowance which has been set at too low a …
Government response. The Financial Conduct Authority (FCA) is taking action to increase consumer awareness of investment scams and the common tactics fraudsters use. It has stressed the importance of rejecting unsolicited offers, getting impartial advice and checking the FCA Warning List before …
Department for Work and Pensions
25
Recommendation
Fifth report: Protecting pension savers…
There are many bodies with potentially overlapping enforcement responsibilities relating to pension scams. These include, but are not necessarily limited to: the Pensions Regulator, the FCA, the Insolvency Service, HMRC, Information Commissioner’s Office, the police service, the Serious Fraud Office, the Pensions Ombudsman and the Financial Ombudsman Service. The fragmentation …
Government response. Project Bloom operates on the basis of partnership working and has no statutory footing. We agree that it could benefit from being placed on a more formal footing within the existing partnership. Central coordination of intelligence is essential. We are …
Department for Work and Pensions
26
Recommendation
Fifth report: Protecting pension savers…
The FCA told us that there have been a very large number of prosecutions involving scams and unauthorised business. We do not agree with this assessment. Its own figures—revealed only through Freedom of Information requests—show that there were just 25 convictions. We have heard numerous criticisms that the FCA is …
Government response. Her Majesty’s Revenue & Customs is happy to work with pension schemes to improve the clarity and accessibility of guidance on the potential consequences and tax charges involved, when accessing their pension before the normal minimum pension age.
Department for Work and Pensions
27
Conclusion
Fifth report: Protecting pension savers…
We have heard devastating evidence from pension scam victims who were persuaded to hand their savings over to a scammer because the scam pension scheme was registered with HMRC. We welcome the action that has led to a reduction in cases such as this. HMRC should make clear that a …
Government response. Her Majesty’s Revenue & Customs (HMRC) aims to treat all of its customers with empathy and respect. This includes tailoring its approach to individual customer needs where additional support is required. In circumstances where tax is due, HMRC may refer …
Department for Work and Pensions
28
Recommendation
Fifth report: Protecting pension savers…
Regulators exist to protect savers and not enable scammers. Where a regulator has failed in this fundamental duty they should be held accountable. We recommend that the Government review the recourse available to pension scam victims when the actions of a regulator have been beneficial to the scammer.
Government response. Her Majesty’s Revenue & Customs (HMRC) is currently a member of the Project Bloom Communications Group and works alongside the other members to help promote the warning signs of scams. HMRC has always co-operated with the other members of Project …
Department for Work and Pensions
29
Conclusion
Fifth report: Protecting pension savers…
The pensions and wider financial services industry has a strong reputational interest in preventing scams. The regulators responsible for protecting the reputations and consumers of these industries are largely levy funded to meet this interest. Levy payers, particularly those regulated by the FCA paying into the Financial Services Compensation Scheme, …
Government response. The Pensions Regulator (TPR) is working to ensure its processes thoroughly assess the value for money that independent trustees (ITs) provide. This includes comparing the amount recovered with the costs of doing so and the impact upon members’ pensions pots. …
Department for Work and Pensions
30
Conclusion
Fifth report: Protecting pension savers…
Project Bloom is a multi-agency task force set up to tackle pension fraud in 2012. It is not a statutory body and receives no dedicated funding. The members of Project Bloom have argued convincingly to us that it has the potential to be an effective body but is restricted by …
Government response. It is unlikely to be in a member’s best interest to transfer out of a scheme before attempts to recover assets have been concluded. Savers who left the scheme early would potentially miss out on an independent trustees (IT) work …
Department for Work and Pensions
31
Recommendation
Fifth report: Protecting pension savers…
The establishment in 2012 of Project Bloom, the multi-agency task force set up to tackle pension fraud was an attempt to overcome this. We support the creation of Project Bloom, but it has become clear that it does not have the capacity in its current form to achieve its objectives. …
Government response. We agree there is certainly scope for further action in this area and ensuring a more joined up approach. The Money and Pensions Service (MaPS) helpline or webchat is often the first point of contact for customers who have concerns …
Department for Work and Pensions
32
Recommendation
Fifth report: Protecting pension savers…
As well as ruining someone’s financial future, a pension scam can leave them with large unexpected tax bills. Pension liberation scams often involve scammers claiming that there are legal loopholes, such as loans or cash incentives, which can allow a person to access their pension early, before the age of …
Department for Work and Pensions
33
Recommendation
Fifth report: Protecting pension savers…
HMRC has been described as “unrelenting and uncompromising” in the pursuit of unauthorised payment charges. While the position taken by HMRC is legally correct, it has often lacked empathy or understanding of impact that its demands have on victims. We recommend that HMRC should make greater use of its current …
Department for Work and Pensions
34
Recommendation
Fifth report: Protecting pension savers…
We recommend that HMRC should re-join the pension scams taskforce Project Bloom. It was a founding member when Project Bloom was set up in 2012 but has since left. The Minister for Pensions and Financial Inclusion told us that he “100%” supports HMRC re-joining Project Bloom. We agree.
Department for Work and Pensions
35
Recommendation
Fifth report: Protecting pension savers…
Where a pension scheme has been used as a vehicle for a pension liberation scam the Pensions Regulator will appoint an independent trustee. The trustees management fees and associated legal costs will be met directly from the scheme’s assets, which often need to be recovered first by the trustee. With …
Government response. We are already in the process of ensuring we thoroughly assess the value for money (VfM) provided by the independent trustees (IT) we appoint. This would include comparing how much the IT is able to recover with the costs of …
Department for Work and Pensions
36
Recommendation
Fifth report: Protecting pension savers…
Members of schemes where professional trustees are appointed can face long waits to receive any recovered assets, even if a significant proportion of the assets are recovered. Often because of the costs associated with providing communications to members, which are met directly from the recovered assets, scam victims perceive communication …
Government response. Pension scams are devastating, and we understand how disappointing it must be for victims to find independent trustee charges have reduced the amount that can be returned to them further. However, in most cases, by the time an IT has …
Department for Work and Pensions
37
Recommendation
Fifth report: Protecting pension savers…
Being a victim of any fraud can be devastating. Pension scams often involve the loss of a lifetime’s savings and many of the plans people have made for their later life. Victims of pension scams suffer lifelong financial harm and potential lifelong impact on their mental wellbeing. We recommend that …
Government response. We agree there is certainly scope for further action in this area and ensuring a more joined up approach. The Money and Pensions Service (MaPS) helpline or webchat is often the first point of contact for customers who have concerns …
Department for Work and Pensions