In August of 2018 the Pensions Ombudsman upheld a complaint from a policeman after he had transferred his pension from the police scheme to scammer without the scheme carrying out adequate checks.
Now, on the face of it you could say that that was an acceptable approach from the scheme, in that a formal request submitted by the member in order to transfer benefits from one scheme to another should be processed, and that they [the scheme] should accept that request and move the funds.
Considering it further, the trustees of the scheme do have an obligation to the member in order to ensure that the funds and benefits they hold on behalf of that member, are managed correctly. And in accordance with the normal rules and regulations that go with this type of scheme. Is it fair to expect the trustees to be ‘trusted’ to make sure that any transfer made fits with this obligation? As the ombudsman ruled.
My view would be that, they do have some responsibility and a duty of care. The Pension Ombudsman agree.
But we have a problem, we have a problem with bad guys and bad firms attempting to transfer money away from all kinds of pension schemes in order to defraud the members of their pensions. Despite 30 years of regulation we have seen that the bad guys continue to get away with their bad actions. Indeed Government has recently announced bans on cold calling in order to prevent some of these bad transfers, the reality is we still don’t have a proper ban in force and many more individual members of pension schemes will end up losing money.
There is also the issue of woefully inadequate enforcement in the event of a transfer. When these dodgy transfer businesses are finally caught, it ends up with a major paperchase which it seems few police forces are able to cope with and the attitudes towards white collar crime mean that a lot of these people [bad guys] get away with it. The National Crime Agency reports that it’s working with regulators – yet very little seems to be done – limited action.
Project Bloom also seems to be woefully inadequate in reporting on these matters and clearly not estimating the size of the problem correctly, based on it’s own assumptions.
In February 2017 the Pensions Regulator even called for a Safe Schemes list.
Fact is this important and no doubt expensive project has been around for a number of years and delivering very little.
I have been approached by several campaigners on this matter in recent months and the evidence is frightening, these firms are transferring pension business and committing crime on an industrial scale. This is not some backstreet firm, it’s organised and professional.
When I submitted my returns to the Pension Select committee a few months ago one of the things I suggested was that we should make the various regulators a bit more responsible for what is actually happening here. Now I know that passing the buck to pension scheme trustees or to the pension regulator may not be the right answer. That said we have a particular problem, we have a problem where lots of individuals are losing big chunks of their hard-earned pension money.
My suggestion is we consider very carefully the obligations that trustees have in order to make sure pension money is protected and that it goes to the right place if moved. We also make sure that any advice provided is, either second guessed by a third party advisor or actuary. Or indeed it is signed off or accepted by the trustee as being a legitimate transfer. So far this year we’ve seen more pension mis-selling and poor advice in relation to pension transfers – despite pressure from the regulator – nothing seems to change.
So, here goes.
The Implementation a very straightforward traffic light system – red yellow green. Would help consumers, this would follow an assessment by a third party adviser/actuary/pension transfer specialist – and would consider the receiving provider along with (potentially) other issues. The benefit of this would be to put in place further checks on the quality of advice that is being provided but also to make the bad guys consider very carefully and understand that there is a checking process in place and they will have to deal with.
There is not an advisor in the country that should be concerned about having a third party check on their advice and to be under external scrutiny. Importantly, by transparently providing an additional check on their advice to a member of the public should make everyone feel a lot more comfortable.
The truth is, on this matter Government and law enforcement seems powerless to be able to protect individual pension scheme members from the scammers. I would suggest therefore that the industry picks up the baton and puts in place its own systems of checks and balances to ensure the individual members are protected. It has everything to gain and little to lose.
I doubt the industry will because it feels that it has enough to do – but if the pension transfer side of personal finance wants to be credible in the eyes of the public and doesn’t want to face future regulation it should act now.
An end on commission income based on fund value for pension transfers (yeah I know the industry calls them fees – however fees are traditionally paid direct, by the customer, not from the value of the investment), a simple allowance for advice paid directly from the scheme. Puts advisers on a par with other professionals and means some of the bad guys won’t be able to function.
The legislation is already in place, just needs extending and promoting.
Also means that members can get access to high-quality advice without having to find the costs of advice upfront.
There are many ways to deal with these issues and we know that under the current system, for some reason change will not be coming soon enough – which means there needs to be an alternative. At the moment, the industry ain’t looking that good and the bad guys are still getting away with it – so something needs to change.