TTF Blog: 10 August 2020

Transparency Task Force to Interview Pension Scam Victims

by Alex Varley-Winter, TTF’s Head of Media Relations & Investigative Reporting

Pension scammers can strip enormous sums of money from savers, thanks in part to very low public awareness of the problem. We believe victims’ stories need to be heard. With this in mind Transparency Task Force is busy interviewing Pension Scam victims to inform MPs’ new Inquiry on Pension Scams. Our deadline is rushing up: September 9th.

If you have been pension-scammed or know somebody who has, you may be exactly who we need to hear from the most. We can if you wish compile video interviews – similar to my chat with TTF’s founder Andy on TTF TV, to address MPs directly.

You can also speak to us in strict confidence. TTF has a pension scam victim on our Advisory Group who is happy to speak to other victims – we know trust is paramount and we keep confidential sources private.

Learning from those who do not wish to ‘go public’ or appear in a video is crucial. Some victims have not even told their romantic partners what happened to them; and some are, most worryingly, at risk of suicide.

Anyone can be scammed. Recent FCA research found: “the more highly educated the person, the more likely they are to fall for a pension scam” . This is particularly relevant when there are few information sources you can trust. Google was this year accused of profiting to the tune of £millions – in an automated manner – from investment scam ads.

You can also submit evidence to Inquiry MPs solo and we would encourage this too. In their Call for Evidence, MPs announce: “The deadline for written evidence is 9 September 2020. … your evidence will be able to have more impact on our work if we receive it by the deadline.

How to Spot Signs of a Pension Scam

Pension scams can range from outright frauds, to misadventure and misleading PR. They all target people’s pension pots and may adopt a veneer of beguiling sales tactics.

Research by Citizens’ Advice recently found 87% of consumers who said they were ‘confident’ spotting scams still ‘worryingly’ did not balk at absolutely major warning signs in Figure 5 on the right. The Pensions Regulator and the FCA describe pension scammers touting “exotic” investment opportunities such as properties abroad, renewable energy bonds, storage units,  biofuels or forestry;  offering “guaranteed” high returns, or offering to “review” your pension for free.

As of last year, any ‘pension’ firms that cold-call you to discuss your pension can be fined up to half a £million, they are banned. The internet, though, is a Wild West. Last Friday something interesting cropped up when I was using Duck Duck Go to find links for this article: my search results were preceded by adverts claiming I can draw down my pension early, offering to review it  for me for free – both warning signs of scams.

Such ads can snare victims across search engines and social media. The Tech Transparency Project reported earlier this year on coronavirus scams, that “even when [Google] promises to crack down on bad actors, the machinery of its advertising business doesn’t always play along—and may even make the problem worse”.

Graphic by Citizens' Advice

Transparency Task Force’s View on Pension Scams

 

There are multiple types of scam that vary in degrees of abuse. 

Our working assumption is that most pension scams take one or more of the following forms, sometimes more than one in tandem. We’d be interested to hear from you if you have examples or other forms to suggest:

  • Outright frauds: for example, the pension beneficiary is encouraged to invest in an asset class that does not exist;
  • Pension liberation schemes: these are illegal workarounds that enable people to access their pension pot when they are below the age at which pension benefits can legitimately be taken;
  • Defined benefit transfers: advisers may recommend the transfer of capital from ‘gold plated’ pensions to defined contribution ones against client interests;
  • Misadventure: a fund or asset manager may depart from its stated investment mandate, whether through hubris, recklessness or to benefit connected parties, thereby exposing clients to risks of which they are not informed and which they would not willingly take;
  • Unauthorised or misunderstood charges: ‘wealth managers’, ‘financial advisers’, ‘fund managers’ and others may impose charges on assets or conditions (such as exit fees or liquidity restrictions) that either are not notified to clients in advance or that are not presented in such a way that clients understand them; proceeding without informed consent to unreasonable terms or fees.

Key Questions in Pension Scams Probe

In their ‘Call for Evidence’, the MPs list some of the questions they hope to answer in their inquiry. However, they add that ‘you can tell us anything relevant’ and with this in mind, our research interviews will be largely victim-led. Sue Flood is one of the victims who helped to propel most of our campaigns in this arena. She personally lost £150,000 as a result of a pension scam that was described in Parliament as a ‘fraud on the trustees’ powers’ , elucidated in a High Court judgment as a form of ‘fraud on the power of investment’. She sits -voluntarily- on the TTF’s Advisory Board: “For me as a victim, and others, TTF gave hope, an opportunity and a voice, in places where that was not being listened to.” she said, adding that ‘the majority of victims I’ve spoken to have been in this situation for ten years.”

Victims can also take action via the All Party Parliamentary Group on Pension Scams that is being formed and scheduled to have its first meeting on 7th September. Conservative MP Bob Blackman will be actively involved in the APPG, and told a group we assembled on Zoom last month: “We need to build up a database, make sure people are aware of scammers and get the pensions industry to front this.”

Inquiry Chair’s Message to Victims

As we recently shared on this blog – the Chair of the Work and Pensions Select Committee, Stephen Timms MP (Labour),  recently spoke to Radio 4′s ‘You and Yours’, which featured the harrowing story of a British Steel Worker who lost £128,000, leaving him a ‘broken man’.

The victim, Billy Reed, told listeners how he had been cold-called by a man asking to discuss his British Steel pension, advising him to invest it in a children’s home.  When he could not contact the caller again it raised his suspicions: “I thought ‘I’m not going ahead with it’ and I tried to stop it. [But] when I phoned up my pension from the British Steel it had already gone. Apparently, unbeknown to me I had signed my waiver to the cooling off period, which I knew nothing about.”

Stephen Timms MP responded on the programme that “in 2015, after what happened to Billy I think, there was a set of what the Government called Pension Freedoms introduced, which increased the options for pension savers, for what they could do with their money, but also unfortunately created new opportunities for fraudsters and others to take advantage of other people’s savings. The problem’s got bigger since 2015.”

He said: “We’d like to get evidence from victims, people who’ve suffered this problem, from people in the industry, we’d like written evidence from people with ideas about what to do about it. And, later in the inquiry, sort of September October, we’ll be asking people to come in front of the Committee so we can quiz them about their ideas and experiences. And, at the end we’ll bring in regulators and a Minister I hope, as well, to talk about what we’ve heard and … the changes that the Government might make to tackle the problem.”

Who in Westminster is  Taking Action?

Beyond the extremely welcome news of a formal Inquiry, TTF has helped to set up an All-Party Parliamentary Group against Pension Scams.

Composed of MPs and Peers from different parties, we hope this group will serve as a touchstone for meaningful change and engagement between victims, other stakeholders and lawmakers.

So far, twelve parliamentarians have stepped up to the APPG: Jonathan Reynolds, Lab-Co-op MP for Stalybridge and Hyde and the Shadow Secretary for Work and Pensions; Bob Blackman – Conservative MP for Harrow East; Jack Dromey, Labour MP for Birmingham Erdington; Harriet Baldwin,  Conservative MP for West Worcestershire; Nick Smith, Labour MP for Blaenau Gwent; Yvonne Fovargue, Labour MP for Makerfield; Christina Rees, Labour MP for Neith; Henry Smith, Conservative MP for Crawley; Lord Balfe, Conservative peer; Baroness Crawley, Labour peer; Baroness Bowles, Lib Dem peer and Lord Harris, Labour peer 

Volunteers are also being sought for the APPG’s Secretariat. What the Group does will be decided by the MPs that run it, but some project ideas that have already been floated include: A Question Bank to identify the questions that need to be asked and who of; A database of pension scams; Outreach to other organisations within the Pensions industry; Networks for the Parliamentarians to use; and, helping to compile a Guide for the victims of pension scams.

Press Timeline of relevant articles:

04 Aug 2020Have your say: Will the WPC’s inquiry into the impact of pension freedoms be too overshadowed by Covid-19 impacts? by Professional Pensions

03 Aug 2020 – ‘“I’m 39, have lost my job and am in debt – can I unlock my £18k pension?” … DON’T do it!’‘ by Steve Webb for This is Money

01 Aug 2020‘I lost £2.3m after I was conned into transferring my pension’ by Jessica Beard for the Telegraph

31 Jul 2020 ‘Common sense’ prevails as pension freedom withdrawals fall 17% — But drop is expected to be ‘a short-term blip’ by Robbie Lawther for International Adviser

31 Jul 2020HMRC figures show plunging pension freedom withdrawals by Hope William-Smith for Professional Adviser

28 Jul 2020UK Pension Scams Under Scrutiny After 2015 Relaxation in Rules by Reuters; MPs launch inquiry into pension scams  by Tom Kelly for Daily Mail & MPs launch wide-ranging pension scams probe by Justin Cash for MoneyMarketing

24 Jul 2020 – US business groups seek steps to stamp out online fraud by Leonie Barrie for Just Style

22 Jul 2020Pension scams increase amid lockdown by Sophie Smith for Pensions Age & Missed Opportunity to Use Victims in Scam Work by Amy Austin for FT Adviser

20 Jul 2020 Campaigners Aim to Create Pension Scam Database by Michael Klimes & Government eyes unauthorised firms by Justin Cash for MoneyMarketing

29 Jun 2020 – MPs Pushed to Launch Pension Scam Inquiry by Amy Austin for FT Adviser & Lawmakers Urged To Open Inquiry Into Pension Scams by Martin Croucher for Law 360

29 Dec 2019‘Lambs to the slaughter – tens of thousands of savers have lost up to £10billion in rogue pensions schemes sanctioned by the government… and now the taxman is threatening VICTIMS with fines’, by Tom Kelly for the Daily Mail