Pension schemes face tougher due diligence requirements on transfer requests as new figures show the amount lost to pension scams and fraud has hit £10 billion five years after the introduction of the pension freedoms.

Regulators, courts and The Pensions Ombudsman (TPO) have all made significant statements in recent months which cover both the fall-out from previous scams and the prevention of future scams. In its recent report, the House of Commons Work and Pensions Committee called on the government to take quick and decisive action to protect pension savers, against the backdrop of new opportunities for scammers during the Covid-19 pandemic.

The committee cited figures by the Pension Scams Industry Group (PSIG), of which I am a member, which estimate that around 40,000 savers have lost around £10bn to scams since 2015, based on an estimate of 5% of all pension transfers showing typical scam signs. This month, PSIG updated its voluntary code of good practice for the pensions industry – but with so many developments on the horizon, it is likely another update will need to follow before the end of the year.

Tougher due diligence requirements and greater scope for compensation

A recent TPO decision has moved the goalposts for ceding schemes accused of inadequate due diligence in relation to transfers that took place in 2013, when The Pensions Regulator (TPR) began its scorpion-themed anti-scams campaign.

Previously, TPO had suggested it was reasonable to give trustees three months leeway from the point at which the campaign began to ensure appropriate processes were in place to guard against the risk of transferring pensions into scams. The new decision shows that TPO has since reassessed that timeframe, reducing it to one month as, in the view of the ombudsman, this period of time “would generally be sufficient for a provider to put in place any procedures necessary as a result of” the new guidance.

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