Rise in Red Flag Activity Not as Simple as Stats Suggest
UK pensions consultancy, XPS Pensions Group (XPS), has reported a concerning rise in "red flag" pension transfer scam activity. It says that the number of red flag incidents rose from 13% in June 2018 to 34% in June 2019 and calculated the total value of the pensions savings placed at risk during the 12-month period at £73,000,000*.
It is possible that the rise in red flags could be a by-product of the enhanced reporting processes that came into effect with the June 2018 revisions to the Pension Scams Industry Group (PSIG) Code of Good Practice (originally published in 2015). These served to highlight pension scam warning signs, to encourage greater awareness of fee and charging structures, and to improve communication between pension schemes and their members.
However, it is important to note that not all red flag incidents are scams; in many cases, a pension scheme may simply be concerned that a reported incident meets one or more of the red flag criteria laid out in the PSIG Code of Practice and will have reported it to err on the safe side.
Revised Code of Good Practice for 2019
The latest revised Code of Good Practice (Version 2.1 – published 10 June 2019)** highlights ten major changes to the June 2018 version. These include:
- A ban on cold-calling
- Details of the FCA's letter on managing the risks of defined benefit to defined contribution transfers
- Warnings on the risks and practices of claims management companies
Margaret Snowdon OBE, chair of PSIG, commented, "We've been making good progress in our fight against pension scams, with many millions saved from the clutches of scammers through our work." ***
She added that scammers are cunning and will continue to develop their techniques, hence the reason why the Code of Good Practice must continue to be updated.
Snowden stated that to end the problem of scams and scammers the introduction of new legislation is required, but, until this time, the voluntary code is published to offer guidance and tools for pension providers and help protect scheme members from suspicious activity.
Advice for Pension Members
If you are concerned about potential pension transfer scam activity, you can seek help from one or more of the following organisations:
- Your pension scheme administrators
- The ScamSmart website
- The Money and Pensions Service
- Citizens Advice Bureau
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* https://www.xpsgroup.com/news-and-views/xps-identify-scam-activity-warning-signs-on-73m-of-pension-savings/ Accessed 17/06/19
** https://www.blacktowerfm.com/images/docs/Combating-Pension-Scams-Code-of-Good-Practice-2019.pdf Accessed 20-06-19
*** https://www.ftadviser.com/pensions/2019/06/10/new-pension-scams-code-to-include-warning-on-cmcs/ Accessed 21-06-19