• Pensions Regulator launches a new scam fighting plan
• Pensions Ombudsman publishes its Corporate Plan
• Adjustments proposed to Pension Protection and Fraud Compensation legislation
• Pensions Regulator updates its guidance on trustee oversight of investment consultants and fiduciary managers

Pensions Regulator launches a new scam fighting plan

The Pensions Regulator has launched a new scam fighting strategy to renew and strengthen its efforts to protect savers as it notes that increases in the cost of living may leave them potentially even more vulnerable to scammers.

The new strategy follows a joint assessment of the threat from pension scams carried out by the Regulator and the National Fraud Intelligence Bureau (see Pensions Bulletin 2022/24), and will complement the work of Project Bloom, the multi-agency taskforce created in 2012 to tackle pension scams, which is now set to be renamed the Pension Scams Action Group (PSAG).

The three-pronged plan aims to:

• Educate industry and savers on the threat of scams
• Prevent practices which can harm savers’ retirement outcomes
• Fight fraud through the prevention, disruption and punishment of criminals

It also sets out measures including:

• A commitment to develop a new PSAG strategic threat assessment annually or biennially and explore the setup of a new dedicated PSAG scams hub to co-ordinate intelligence and direct fraud disruption and prevention activity
• Exploring opening a “regulatory sandbox” to allow the pensions industry to test solutions for scam prevention and intelligence gathering in partnership with other relevant regulators
• Working to improve the pensions consumer journey including reviewing guidance on member communications for scam-prevention messaging
• Continued promotion of the industry-facing Pledge to combat pension scams campaign
• Encouraging consolidation of poorly run schemes

The strategy also helpfully sets out a summary of seven kinds of pension scams, which the Regulator states are often combined with one another.  These are:

• Investment fraud – those who misrepresent high-risk or false investments to savers
• Pension liberation – where scammers mislead savers into accessing their pension pots under the age of 55, unaware that they will incur a tax charge or potentially engage in tax evasion
• Scam pension schemes and providers – schemes and providers set up to deceive victims, which either don’t exist or exist but are committing fraud
• Clone firms – scam schemes and providers that are disguised as legitimate entities
• Claims management companies – such as cold callers who claim savers have been mis-sold a pension and then ask for an advance fee to begin a claims process
• Employer related investment (ERI) – breach of ERI restrictions when employers divert employees’ pension payments to invest inappropriately in their business, leading to losses to savers
• High fees – excessive fees often layered through unnecessarily complex business structures

Related to these seven are recovery room scams.  This is where fraudsters approach pension savers who have been scammed, offering to help them get their money back for an upfront fee.

The Regulator also challenges the industry to do its part by noting that just 253 crime reports were made to Action Fraud in 2022/23.  The Regulator believes that industry must do more because this lack of data hampers law enforcement efforts and means the understanding of how savers are being targeted is difficult to determine and pursuit of criminals is much more challenging.  With good data provided by industry, the Regulator can tackle and support law enforcement partners in PSAG to fight fraud and criminality.

Comment

The scam threat is ever present and continually evolving, and unfortunately, the cost-of-living crisis is only likely to further encourage the scammers.  So, it is good to see the Regulator continuing to focus on this area.

This latest initiative also seems to address some of the concerns set out by the Work and Pensions Committee in its March 2021 report (see Pensions Bulletin 2021/14).  Although not made clear in the strategy, we understand that the Government is making some additional resource available to hopefully turn Project Bloom, which was an informal, voluntary and largely secretive gathering of officials, into an Action Group that will bear down on scams and work much more directly with pension providers.

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Pensions Ombudsman publishes its Corporate Plan

Following the publication of its latest annual report (see Pensions Bulletin 2022/28), the Pensions Ombudsman has now published a corporate plan in which it outlines its strategic goals and priorities for 2022-25.

The Ombudsman’s priorities over the next three years are to:

• Reduce waiting times for customers – new posts are being used to strengthen the existing casework and legal teams to increase their capacity to progress business as usual casework as well as deal with complex cases that require more experienced staff. Over the coming year, a new temporary team will focus on clearing more straightforward cases which will free up permanent staff to focus on more complex and demanding cases.  In addition, a recruitment campaign in 2022/23 is intended to increase the number of volunteers who contribute to the success of the Early Resolution Service
• Continue the work of the Pensions Dishonesty Unit – this investigates more cases than otherwise would be possible where there is alleged dishonesty by trustees. It has been run as a pilot since July 2021 and further funding has been received recently to enable it to continue until 31 March 2023.  The Ombudsman reports on good progress having been made but given the complexity of the cases being investigated, it will take time before it starts to see any tangible results.  The Ombudsman intends to evaluate the success of the pilot and secure additional funding for 2023/24 and 2024/25
• Work with stakeholders across the industry to improve dispute resolution – feedback from a stakeholder survey in 2020 enabled the development of the new How to avoid the Ombudsman webpage. The Ombudsman will be developing an organisation-wide Communication and Engagement Strategy in 2022/23 for the first time to help target communications where they have most impact and increase how it shares insight from cases received

The corporate plan also highlights some factors that could cause further demand for the Ombudsman’s services.  These include economic climate and recession, the launch of the Pensions Dashboard and increased awareness of scams.

Comment

The Pensions Ombudsman service is a vital part of the regulatory landscape and as such it is good to see that it is being given the additional resources necessary for it to carry out its work, set against a background of increasing demand and more complex cases warranting investigation.

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Adjustments proposed to Pension Protection and Fraud Compensation legislation

The DWP is proposing some technical amendments to the legislation governing the operation of the Fraud Compensation Fund (FCF) and the Pension Protection Fund (PPF).

• In relation to the FCF it is proposed that the PPF Board should be able to make interim payments to schemes from the Fund to cover fees and costs while FCF claims are progressed. This reflects the common experience that schemes potentially in scope for FCF compensation at present have exhausted most or all of their assets and as such require interim funding to cover costs such as trustee, legal and accounting fees, without which they may not be able make the necessary investigations relating to the FCF claim
• In relation to the PPF it is proposed to change the surviving child dependants’ provisions so that a gap between qualifying courses of more than one year does not result in the loss of PPF compensation that might otherwise be payable until the age of 23. The intention is not to disadvantage those who take a “gap year” (which is normally more than 12 months and is usually taken between school and university)

Consultation closes on 9 September 2022 and the intention is for the regulations to come into force, on a prospective basis, in Spring 2023.

Comment

Both proposals are necessary adjustments to the current legislation and as such we welcome them.

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Pensions Regulator updates its guidance on trustee oversight of investment consultants and fiduciary managers

The Pensions Regulator has updated two parts of its four-part guidance for trustees in relation to investment consultancy and fiduciary management services.  The update has been required as the Regulator prepares to assume responsibility for monitoring trustee compliance in two areas from the Competition and Markets Authority on 1 October 2022.

The guidance updated is as follows:

• Setting objectives for investment consultants – which now starts by setting out some key differences on this aspect between the CMA Order and the DWP’s finalised regulations
• Tendering for fiduciary management services – which includes, in a new Appendix D, guidance on how trustees might assess the performance of potential and existing providers of fiduciary management services using the Global Investment Performance Standards (GIPS)

Both sets of guidance previously reflected the contents of the CMA Order finalised in June 2019, but needed to be adjusted after the finalisation of DWP regulations that put the above two CMA remedies into pensions law (see Pensions Bulletin 2022/22).

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