Over £2 billion was pilfered from the pension savings of innocent contributors by unscrupulous advisers in a single year.
According to a joint committee’s research into ‘Pension costs and transparency’, too many fraudster masquerading as pension advisers are exploiting older people looking to stretch their pension through investments. Unfortunately, too many pension fraudsters have successfully conned their victims into parting with their hard-earned pension contributions in recent years.
Whilst the report insists the increase in pension fraud is not a consequence of recent pension freedom regulations, the committee has urged key financial regulators to do more in preventing the proliferation of pension fraud.
In particular, the Financial Conduct Authority (FCA) was accused of severely under staffing their dedicated pension scams team.
In total, only ten of 3,700 FCA employees are actively working on scam prevention. The committee recommended the FCA review their processes to determine whether enough resource is dedicated to protecting individuals from scams.
The number of unauthorised firms able to offer their poor advice and services is on the rise and able to grow because of a perceived failure to monitor and prevent ‘phoenix firms’ from opening.
The report claimed that certain firms opt to voluntarily go out of business once they realise that their advice has been questioned and they are likely to be held accountable for their poor choices. Once the firm closes, it is no longer liable to pay compensation claims. The company then reopens under a different name and continues to sell questionable services.
The committee recommended a more robust and thorough list of unauthorised firms be expanded into a widely publicised database. This should be regularly updated by governmental organisations involved in pension scams in order to act as an up to date warning system.
Rt Hon Frank Field MP, Chair of the Committee, said:
“Ripping off pension savers could be eliminated. The select committee is calling on the Government to shine the searchlights into that part of the financial industry that has settled down to misinforming, mischarging, overcharging and making a fat living off the hard-earned savings of pensioners. Government and regulators should not wait for the industry to fail to act voluntarily as they have so many times in the past. It must put the full force of the law behind such changes.”
The committee report claimed:
Many Independent Financial Advisers provide good value for money for pension customers. However, the number of people paying for good value advice is low. People who are not able to access good advice need guidance and effective protection from pension scams, which can have life changing impacts. Scams not only harm the individual but cause wider damage to the industry by discouraging potential savers.
How important is the ability to seek helpful and trustworthy pensions advice?
