47: PSIG publishes updated pensions scams code

The Pension Scams Industry Group (PSIG) has published an updated version of its code of practice on combating pensions scams, effective from 1 April 2021. Trustees, pensions providers and administrators should consider taking steps to ensure that their transfer processes reflect the changes, which reflect evolving and more sophisticated scamming tactics as well as recent regulatory and legal developments.

Although the code is voluntary rather than statutory, it aims to set a best practice industry standard and it may well be referred to by the Pensions Ombudsman in complaints about scams.

The updated code has a more user-friendly structure, revised case studies and expanded template letters. Key changes and new recommendations for schemes include:

• focus on vulnerable members (ie those who may be suffering ill health, consumer debt, recent change in life circumstances or the ‘elderly’);
• improve engagement with members by phoning them during the due diligence process, and again before a transfer payment is made where concerns have been identified. This mirrors the requirements in TPR’s Combat Scams pledge;
• all transfers of concern should be reported, not just those that are refused, and reports should always be made to a number of different agencies as detailed in the code;
• the practitioner guide includes additional due diligence questions to ask when assessing scam risks;
• appropriate management information should be developed and maintained, including details of transfers which are refused, cancelled by a member when concerns have been raised with them, or paid under a discharge at a member’s insistence; and
• schemes should highlight the free guidance available from Pension Wise and TPAS.

The code is likely to be updated again later this year to reflect new regulations under the Pension Schemes Act 2021 which will restrict statutory transfer rights unless certain conditions are met. A consultation on these regulations is due shortly, with the new measures expected to be implemented in the autumn.

TPR has recently raised concerns that the pensions industry may be under-reporting scams, following an almost 80% reduction in reports from 2014 to 2020. It has reminded trustees, administrators and providers that reporting via Action Fraud is one of the principles in its Pledge to Combat Scams campaign and has called on the industry to be on high alert for criminal or suspicious activity, particularly given the adverse effect of the pandemic on many people’s finances.

This concern is also highlighted in the Parliamentary Work and Pensions Committee’s recent report from its inquiry into pensions scams. The Committee’s recommendations include ensuring better coordination between the DWP and the Treasury; improving reporting and data collection to understand the scale of the problem; and enhancing the effectiveness of Project Bloom, the multi-agency taskforce set up to tackle pensions scams. It is particularly concerned with the growth of online pension scams and the powerlessness of the regulatory authorities to hold search engines and social media to account.

This is a timely reminder to trustees, administrators and providers to ensure they are raising awareness of scams for members and beneficiaries; have robust and compliant processes for assessing and responding to potential scams; and have a proper awareness of the due diligence requirements and warning flags set out by TPR, FCA alerts and Action Fraud.

Most trustees will already have robust procedures in place but these should be regularly reviewed to ensure that they are evolving as scamming practices evolve. We would be happy to discuss the pension scams framework further and/or provide trustee training on the issue.