Pension Pillar

WILL THE PENSION SCHEMES BILL STOP FRUAD IN ITS TRACKS?

by Dale Critchley Policy Manager Aviva

Pension and investment scams have soared throughout the pandemic and it is vulnerable people and those of retirement age who are the hardest hit. A report published by the Financial Conduct Authority (FCA) last month found the pandemic has left one in four Britons with “low financial resilience”. This could spell disaster for people who have saved their whole lives for the retirement they have dreamed about.

Insurance, savings, pension, and investment fraud is not new, of course. The industry has been working to tackle it for more than a decade. Almost ten years ago, we started a journey which led to Aviva spear-heading the call for an end to Britain’s compensation culture and groundbreaking whiplash reforms.

The problem is that fraud is like water – you plug one hole and it moves to the next weakest point.

Right now, the fraudsters are exploiting the situation which the coronavirus pandemic has brought about, taking advantage of people who are spending more time at home, often in isolation and using the internet to search for financial services and products.

These types of pensions, investment or ‘clone’ scams are unbelievably convincing and pretending to be a well-known brand name is fundamental in persuading consumers to part with their cash and, sadly, their life savings.

Action Fraud data, published by the FCA last month, showed that consumers reported losses of more than £78 million between January-December 2020. In July last year, the Investment Association (IA) reported several firms across the industry had been targeted and affected by investment bond scams. We know the problem exists but what can be done about it?

It’s disappointing that the Online Harms Bill, announced in December, currently excludes scams and other online financial harms from the legislation. The legislation presents an opportunity to protect our customers at every stage of their online journey by helping to tackle financial scams and misleading financial promotions and adverts.

It would mean the online publisher would have a responsibility to ensure that any financial promotion which they communicate has first been approved by an authorised person.

However, there was good news for fraud prevention last month with The Pension Schemes Bill receiving royal assent. The act paves the way to introduce restrictions on transfer rights. We expect these will allow schemes to place transfers on pause where they see suspicious activity and require members to seek independent guidance before they can proceed. This should help to ensure that fewer people fall victim to pension scams.

We’re also eagerly awaiting the report on pension scams which is due soon and was the first part of the Work & Pensions Committee inquiry into Pension Freedoms. The second part of the inquiry will look at how consumers access retirement advice.

Ultimately though, the key to tackling fraud is better intelligence and information sharing across our industry and with the banks and fraud enforcement authorities. While there is money to be made, fraudsters will find a way to get their hands on it. We need to shout it from the rooftops that we will never stop trying to stop them.