The cost of fraud

Cost of pensions fraud could be more than £14 billion

The People’s Pension1, the workplace pension provider, estimates that as much as £14.6 billion may have been defrauded from UK pension savers.

Results of a survey by The People’s Pension, conducted by YouGov, found that 0.46 per cent2 of all UK adults questioned, said ‘I’ve been a victim of a pension scam, where someone has defrauded me of money from my pension pot’. These figures indicate that as many as 240,610 UK adults3 may have fallen victim to pension scammers at some point. Based on an average pension pot size of £60,700, this would mean that the total cost could be as high as £14.6 billion4.

It is widely acknowledged that the true size of the problem is unknown, although Government figures have previously revealed that £43m had been taken from victims who reported the crimes to police over a three-year period, while the influential Pension Scams Industry Group (PSIG) had previously estimated the total value of the crime might be as high as £10 billion5.

The survey also revealed that of all UK adults surveyed:

  • Nearly one in 11 (nine per cent) have ever received unsolicited contact about their pension
  • Four per cent know someone who has been conned out of pensions savings
  • Four in 10 (41 per cent) are aware of pension fraud from news coverage
  • More than half (54 per cent) have received an unsolicited call, text, email or letter from people they suspect might be trying to scam them generally

Phil Brown, director of policy at The People’s Pension, said: “It’s deeply concerning that as many as 240,610 savers might have lost some or all of their hard-earned pension savings. Our estimatefor the number of victimssuggests that some of the figures currently put forward for losses to pension fraud are underestimates. While £14.6 billion is a large number, fraudsters will only want more and with £2.5 trillion of pension savings potentially accessible to criminals, there is plenty for them to target.

“This is a crime which causes untold misery and has the potential to wreck lives, which is why it’s vital that there is a joined-up approach to tackling this very serious problem. We want to see a broader definition of pension fraud to ensure that crime data provides an accurate picture, the establishment of a central intelligence database, not to mention more support for victims.” 

In September this year, The People’s Pension and policing think tank The Police Foundation, published a report, Protecting people’s pensions: understanding and preventing scams6, which made a series of recommendations including granting pension providers greater powers to warn savers about suspected fraud.  There have been cross-party discussions with MPs to ensure the Pension Schemes Bill contains enough provision for pension providers to prevent suspected fraudulent transfers from proceeding. The specific grounds will be contained in secondary legislation, the details of which could be revealed when the Bill returns to the House of Lords in the coming weeks.


Pension companies need more powers to help stop fraud

Greater powers are needed to halt ‘scam’ pension transfers – survey

Nearly eight out of ten (78 per cent) retirement savers agree that pension providers should be able to stop a pension transfer if fraud is suspected, a new survey has revealed.Nearly eight out of ten (78 per cent) retirement savers agree that pension providers should be able to stop a pension transfer if fraud is suspected, a new survey has revealed.

Research for The People’s Pension1, conducted by YouGov, found that more than three quarters of those questioned (78 per cent)2 agreed that pension companies should be able to step in to stop a pension transfer if they believe it’s a scam.

These findings come at the same time the government is being asked to consider including an amendment to the Pension Schemes Bill, which would enable pension companies and trustees to halt a transfer out of a scheme if it triggered any one of a number of ‘red flag’ warnings. Nearly half (49 per cent) of those surveyed strongly agreed that pension companies should be able to intervene in these cases.

Concerns have been raised that the coronavirus pandemic increases the risk that fraudsters will attempt to deprive savers of their retirement savings and the survey found that one in five (20 per cent) UK adults with a pension are now more worried about being a victim of a pension scam compared to a year ago. The same poll also showed that just over a third (34 per cent) of UK adults are more worried about being a victim of some sort of financial scam now compared to 12 months ago.

Phil Brown, director of policy at The People’s Pension, said: “The overwhelming consensus from the general public is that pension companies should be given the legal power to put the brakes on a transfer they think might by fraudulent. As it stands, providers and trustees can merely advise a customer when their suspicions are aroused and our research3 shows that £31 million of transfers went ahead last year even after the savers were made aware of the concerns. The industry needs the support of policy makers if it’s to win the war against merciless fraudsters.”

On Thursday, November 12th, former pensions minister Baroness Ros Altmann will chair a webinar – Who is protecting my pensions?3 – to discuss what can be done to stop fraudsters. She will be joined on the panel by Phil Brown, Margaret Snowdon, the chair of the Pensions Scams Industry Group (PSIG) and Stephen Timms MP, the chair of Parliament’s Work and Pensions Committee. Mr Timms proposed amendments to the Bill which would hand greater powers to trustees and although those were formally withdrawn at committee stage last week, the Government has committed to cross-party talks on the issue ahead of November 16, when the Bill reaches its final stages.

In September The People’s Pension and The Police Foundation published Protecting People’s Pensions: Understanding and Preventing Scams3, which called for urgent and decisive action to be taken by the authorities to stop criminals from the stealing the life savings of workers.