Pension fraud is costing the sector around £6bn a year, research from Crowe and the University of Portsmouth has estimated.

The analysis found that private pensions were losing around £4.9bn annually to fraud, while government and public pensions were losing approximately £1.1bn.

Around £2.88bn of private pension wealth was lost to investment fraud and £1.68bn to payment fraud.

Commenting on the findings, Crowe partner and head of counter fraud, Jim Gee said: “Fraud is a pernicious problem with clear economic effects: private companies are less financially healthy, public service quality is reduced, individuals suffer and charities are deprived of valuable resources.

“Fraud has a serious and detrimental impact on the quality of life across every sector and region of the country.

“In respect of pensions, fraud undermines the value of income for people at a crucial time of life when sources of income are more limited and the chances of financial recovery are reduced.”

Crowe and the university noted that the primary risks in the pensions sector were internal fraud, identity fraud and cyber crime.

Despite the risks, research from Crowe found that a quarter of pensions schemes do not have a plan to respond to cyber crime and just 33 per cent had received cyber crime scenario-based training.

Gee added: “It is time for the industry to review whether it is doing enough. Think of the extensive protection the banking sector places around comparatively small sums held in current accounts versus the less extensive protection around much larger sums in pension pots. This simply does not add up.

“There are gaps in the resilience of pension schemes and their administrators to fraud and cybercrime. The sector must come together to drive up standards of awareness and preparedness.

“A pension, in many ways, represents a life’s work. The industry must better protect the fruits of peoples’ labour, rather than funding early retirement for undeserving fraudsters.”

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