Trustees have ‘grave concerns’ over members approaching retirement being scammed

Pension trustees have “grave concerns” for their members as they approach retirement, with 92 per cent of trustees fearing they will be targeted by scammers, according to research by Wealth at Work and the Pensions Management Institute (PMI).

Defined benefit (DB) pension transfers were found to be a particular area of concern, with XPS Pensions Group finding that 97 per cent of transfer cases having one or more scam warning sign in June.

Indeed, 86 per cent of trustees surveyed by Wealth at Work and the PMI had concerns over DB pension transfer scams.

The research also found that 73 per cent of trustees were apprehensive that their members’ money will run out in retirement and 70 per cent were concerned about a lack of engagement with members at retirement.

Worries about member understanding were also identified, with 88 per cent of trustees citing concerns that members may not understand the tax implications of accessing their pensions, while 86 per cent were worried about members’ lack of understanding about the risks of transferring out of a DB scheme.

Wealth at Work director, Jonathan Watts-Lay, described pension scams as a persistent problem that have a devastating impact on victims.

“The strain on household finances caused by the cost of living crisis could mean that some members are more vulnerable than ever this year,” he noted.

“With almost a quarter (22 per cent) of UK adults having reported being approached by scammers offering free pension advice or a free pension review, investment opportunities, or a tax refund between March and May this year, it’s clear that these fears are well founded.

“Our research shows that trustees are well aware of this situation and have grave concerns for their pension scheme members.”

Watts-Lay stated that trustees and employers play a key role in ensuring members make informed choices about their pensions, including through providing financial education and guidance.

The survey found that 50 per cent of trustees provide financial education and 48.5 per cent provide or facilitate financial guidance for members at retirement, up from 49 per cent and 46 per cent in 2021’s survey, respectively.

“This is no way near the levels that we should be seeing considering the concerns that are being reported by trustees,” Watts-Lay continued.

“However, nearly two out of five (39 per cent) trustees are facilitating regulated financial advice for their members. Encouragingly, this has seen a 9-percentage point increase from 30 per cent since the survey was last carried out in 2021.

“It’s time that trustees and employers do all they can to stop pension scammers in their tracks and put in place robust processes to support and protect members. For those looking at providers for support, carrying out due diligence on them is crucial.

“This should include checking that any financial education and guidance providers are workplace specialists with experience in providing support to members. This can help members understand key issues at retirement such as tax implications, risks around DB transfers and how to spot a pension scam.

“Due diligence on regulated advice firms should cover areas such as qualifications of advisers, the regulatory record of the firm, compliance process e.g. compliance checks of 100 per cent of cases, pricing structure, and experience of working with employers and trustees.

“This now needs to be about striving for good member outcomes and not minimal compliance, as many years of pension savings can be lost in the blink of an eye.”

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