WPC launches pension scams inquiry

The Work and Pensions Committee (WPC) has launched an investigation into pension scams in the first strand of a three-part inquiry into the impact of the pension freedoms and protection of pension savers.

The inquiry, whilst initially focusing on pension scams, will broaden in later stages to look at accessing pension savings and saving for later life, with a formal call for evidence expected next year.

As part of the initial investigation, the committee has launched a call for written submissions as to the prevalence, trends, and common outcomes of pension scams in the current landscape.

The committee has also asked for views on the existing enforcement tools being used, as well as what more can be done to prevent scammers operating, and to prevent individuals from becoming victims of scams.

It will also be seeking opinion as to HMRC’s position on the tax treatment of pension scams victims, and whether this is correct.

Commenting on the inquiry, Work and Pensions Committee chair, Stephen Timms, emphasised that the introduction of pension freedoms in 2015 brought “new freedoms for people to plan financially for their futures”.

However, he warned that this flexibility also meant more potential for the “unscrupulous” to take advantage and scam savers out of what is likely their largest financial asset, subsequently “crippling their dreams of a comfortable retirement”.

He added that the extra financial hardship brought about by the coronavirus pandemic had provided an “added opportunity” for scammers to prey on those people who may be looking to use their pension savings as a form of support.

Timms continued: “We know reported frauds could be just the tip of the iceberg, so the committee is keen to better understand the scale of the pension scam problem, as well as the types of scams in operation and the role of the pensions industry and public bodies in using current powers against fraudsters.

“We also want to know what more can be done to prevent such scams, to halt the huge and devastating impact they have on those looking for security in later life.”

Industry experts have previously warned of a heightened risk of scams throughout the pandemic, with a recent report by Aviva revealing the extent of pensions and investment related scams during lockdown.

The pensions industry has broadly welcomed the inquiry, with Transparency Task Force founder, Andy Agathangelou, highlighting the WPC as “uniquely placed to make serious headway” in an area that has challenged authorities for decades.

He added: “Without a doubt, today’s breaking news gives pension scam victims hope: hope that reforms will be made to make it hard for innocent people to have their pension saving stolen from them; hope that callous criminals will be brought to justice; and hope that all the authorities can become properly aligned and form a united front to defend the Great British public.”

Meanwhile, AJ Bell senior analyst, Tom Selby, reiterated concerns over the role of pension freedoms in pension scams, arguing that giving savers “total freedom and choice” over their pension pot was “always going to make them a prime target for pension scammers”.

He added that whilst the government was “initially slow to grasp the magnitude of the risk”, there has been “far greater focus” in recent years, as seen through the cold-calling ban and the FCA Scamsmart advertising campaign.

Selby said: “It is vital that policymakers and the wider pensions industry continue to monitor scam activity and take action where possible to protect savers.”

Adding to this, Quilter head of retirement policy, Jon Greer, noted that there has been “continuous adaption and amendment” to keep up with the unexpected changes that emerged out of pension freedoms.

He emphasised that many reforms were retrofitted into the system after pension freedoms had come into effect and could have been considered from the start had a consultation approach been taken.

Greer also argued that once the consultation broadens to consider the wider impact of pension freedoms, MPs should also consider whether broader aspects of the system are “working as they should”.

He explained: “The Money Purchase Annual Allowance, for example, is a contradiction to the principles of freedom and flexibility.

“Government should consider whether this is achieving the desired outcome and explore whether a general anti-abuse approach could work better than the rigid, strict approach currently employed.”

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