The Department for Work and Pensions (DWP) is cracking down on regulations to save pensioners up to £38,400. Ministers are consulting on a new safeguard that could prevent sophisticated scams that target retirement savings.
It comes amid increasing concern over the exploitation of Small Self-Administered Schemes (SSAS). The occupational pension, primarily set up by company directors for themselves, family members or key employees, is being increasingly targeted by fraudsters. The government is now working to introduce new measures that would block transfers into certain pension schemes where savers are at risk of being scammed.
Recent figures show that average losses linked to SSAS pension scams are around £38,400 per victim. Ministers want to create a new safeguard that would immediately trigger a red flag where there is no discernible connection between a saver and the scheme they are looking to transfer their pension into.
Pensions Minister Torsten Bell said: “Pension scams can rip away not just people’s savings, but the retirement they are looking forward to. This Government is determined to stay one step ahead of criminals who seek to exploit savers.
“Too often we see fraudsters trying to trick workers into transferring their savings into bogus pensions. We are stepping in to automatically block transfers where the warning signs are flashing red.”
Fraudsters typically exploit SSAS arrangements to convince savers to transfer their retirement funds into high-risk or fraudulent investment schemes. Once the money has been transferred, it is then gone forever.
The new measure would allow trustees to stop transfers before funds leave their pension pot. It comes as part of a wider initiative to combat pension fraud, with further measures set to be introduced later this year.
Gaucho Rasmussen, executive director of enforcement and executive general counsel at The Pensions Regulator, said: “Fraud wrecks lives – and tackling it demands strong, coordinated action. Through the Pension Scams Action Group, which TPR leads, we are working closely with the DWP, law enforcement, the pensions industry and other partners to identify emerging threats and stop fraudsters in their tracks.”