Articles - The scorpion takes to the water

Valentine’s Day marked the sixth anniversary of the Pension Regulator’s launch of its scorpion campaign and a good opportunity to look back at developments with dealing with pension scams. A year ago, I reflected on the evolving nature of pension scams and hoped that the following 12 months would see more being done to catch up with the new models and methods used by scammers.

 By Ben Fairhead, Partner at Pinsent Masons and a member of the Pension Scams Industry Group
 Cold calling ban
 As a first step, the cold calling ban did finally become reality, taking effect in January of this year.
 We have seen a fair amount of scepticism in the press and from the pensions industry since this was implemented, questioning how effective a deterrent this will be. It is true that it has no impact on cold calls made from overseas, and also true that scammers will work around the regulations in any event. However, it is welcome that what always looked like a relatively straightforward legislative change has come into effect.
 Plus, most importantly, the ban should serve as a powerful, and now unequivocal, message for members of the public: if an approach regarding your pension originates with a cold call, it cannot be trusted.
 Statistics/advertising campaign
 The past year has seen more alarming statistics around the number of reports to Action Fraud; the number of suspicious transfer requests; and the sums believed lost to pension scams.
 As against that, we have seen an encouraging move towards coordination between the regulators, with a ScamSmart campaign launched jointly between the FCA and Pensions Regulator in August 2018. A consistent approach on messaging has to be a positive step forward if it means clearer and heightened public awareness.
 The new campaign appears to have seen the scorpion of 2013 replaced with a jet-ski – a new television advertising campaign highlighting the risks of an unscrupulous pension scammer making off with your pension and frittering it away on a life of luxury, with the tagline: "Don't let a scammer enjoy your retirement".
 The campaign is showing early signs of paying dividends given the Pensions Regulator's announcement of a five-fold rise in the number of people visiting the ScamSmart website in the period after the launch. This was offset slightly though by the results of a survey showing over half of 45-65 year olds do not even think they are likely to be targeted by a pension scam.
 Updated Code of Good Practice
 This feeds in to a need for industry to remain vigilant, and June 2018 saw the launch of the updated Code of Good Practice by the re-branded "Pension Scams Industry Group", itself moving with the times, recognising the evolving nature of pension scams and the fact many do not involve any form of pension liberation now.
 Version 2.0 of the Code has seen more emphasis placed on early member communication as a way of trying to dissuade members of schemes unwittingly being lured into transferring their pensions into the hands of fraudsters. It has also brought the industry right up to date with the sort of red flags to look out for with newer types of pension scams, such as so-called "international SIPPs".
 Failure to warn: Pensions Ombudsman determinations
 It is becoming increasingly apparent too that the Pensions Ombudsman is likely to expect some regard to have been had to the 2013 scorpion materials and 2015 Code when assessing complaints of maladministration against those who have allowed transfers to have gone through without adequate checks and warnings.
 The most stark example of that was the case of Mr N, who transferred his pension from the Police Pension Scheme to a suspected scam in 2014. In July last year, the Ombudsman determined that the Northumbria Police Authority had missed certain red flags in allowing the transfer as well as, critically, failed to provide the scorpion materials from the Regulator to Mr N. Following (unusually) an oral hearing, the Ombudsman was satisfied that, on the balance of probabilities, the transfer request would have been withdrawn had appropriate warnings been given.
 I have seen the Code itself mentioned in at least three Ombudsman determinations now. Whilst not carrying the force of law, it does seem likely that, going forward, it will serve as a point of reference when considering whether appropriate due diligence was carried out in relation to transfers that have gone wrong.
 And we should be under no illusions about the likelihood of more complaints and claims materialising. Millions of pounds have been lost to pension scams, some of which is only coming to light more recently, and there is a new market opening up for claims management companies to attempt to pursue recoveries on behalf of scam victims, particularly against ceding schemes.
 That is not to say that all such claims will prove to be well-founded. Without a doubt, there will be plenty where little could have been done to prevent a transfer although the landscape has changed somewhat now, and more will be expected in terms of due diligence now than six years ago.
 Future progress
 There are more legislative changes that could be made such as the change to the statutory right to a transfer - that might still be on the cards for the coming year. However, there seems to be increasing recognition that there will be limits to what can be achieved with changes to the law, and the best way to reduce the sums lost to pension scams is going to be through improved publicity of the risks.
 The scorpion might have taken to the water on its jet-ski, but, looking ahead to the seventh anniversary of the Regulator's campaign come Valentine's Day 2020, let's hope we see a smaller number of victims caught in the slipstream.

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