Providers reveal 10 biggest pension scam red flags

The Pensions Scams Industry Group (PSIG) has published on the nature of pension scams, looking back at data from the past year.

PSIG is a voluntary group set up in 2015 to, no surprises, combat scams. Its latest research used data from three providers, Phoenix Life Assurance, Standard Life Assurance and XPS Pensions Group, to present a picture of how scams have involved. 

Covering 27,087 defined contribution and defined benefit transfers worth £1.33 billion, the report established 10 red flags for pension scams. 

'Identifying red flags is crucial to effective protection. Due diligence will often throw up more than one red flag, increasing the likelihood that the transfer is a possible scam,' the report said. 

Read on to see what PSIG found. You can also read the full report, and the questions the providers answered, here. 


Unregulated intermediary

Unregulated advice was a key red flag identified by the report. This included unregulated introducers. 

'The majority of red flags raised by due diligence concern the quality of adviser. For example, 52% of flags involved an unregulated introducer, an adviser in a different country from the member, or an adviser who appears on an internal watch list because of previous concerns,' the report said. 

PSIG added: 'The number of transfers originating from a cold call is lower than we expected but the number of suspicious cases involving unregulated advisers or introducers is higher'.

Member unaware of adviser

PSIG identified that in some cases clients were not aware of the adviser they were supposedly being advised. It found these clients did not recognise this being a scam red flag. 


Member cold called

The government recently banned pension cold calling, but this did not stop people being contacted by scammers in this way last year. 

PSIG found that only 6% of suspicous transfers in its survey originated from a cold call. 'This could be because of the expectation during 2018 that a ban on cold calling was imminent, or because scheme members were unwilling to say that they had been cold called or did not realise it,' the report said. 

However the report also warned: 'Such a low figure shows that our efforts to convince individuals about the dangers of scams cannot simply focus on the cold calling ban. Scammers are already using other means of contact, including email and on-line advertising, as well as word of mouth and factory-gating.'

Low member understanding 

Many of the suspicious transfers identified in PSIG's survey involved people who did not understand what they had got themselves into. 

'Another significant concern is member awareness. In just under half (49%) of cases, the member had limited understanding or appeared to be unaware of who was providing the advice, the fees being charged, or the receiving scheme to which the transfer would be made. Such customers may well be regarded as “vulnerable”' the report said. 

Adviser on a watchlist

The report found that many of the red flag activities taking place in 2018 involved advisers who had already been placed on a 'watchlist'.

PSIG providers had these internal lists when 'previous concerns' had been raised. 

Suspicious receiving scheme 

According to PSIG 19% of suspicious transfers flagged were related to the nature of the receiving scheme. 

'Organisations go to great lengths to protect members and customers, with impressive and extensive research being carried out on the receiving arrangements as well as advisers and intermediaries. The time spent by administrators on due diligence ranges from 15 minutes for a straightforward case to ten hours or more for more complex ones,' the report said. 

No paperwork from receiving scheme

PSIG also identified the fact there was no paperwork from a receiving scheme in a transfer as red flag that it may be part of a pension scam.  

Members can access funds more tax efficiently

Claims that members would be able to access funds 'more tax efficently' was highlighted as a red flag by providers. 


Guaranteed return promised

Members being promised a guaranteed return was also highlighted as a potential red flag for a pension scam. 

'20% of red flags related to the terms of the transfer including investment returns, guarantees made or the ability to access funds,' the report said. 

TVAS not provided

Providers said the lack of a transfer analysis was often a sign that a scheme may be part of a pension scam.