Thousands of pension savers at risk of fraud wait six weeks for help
More than 10,000 pension savers potentially at risk of fraud have been forced to wait weeks for advice, a Government review has found.
Anti-fraud rules introduced in 2021, gave pension firms more powers to block potentially fraudulent transfers in a bid to stem the tide of pension scams which claimed more than £30m between 2017 and mid-2020.
The rules also outlawed cold calling, a tactic often used by criminals in so-called pension liberation scams, where savers are convinced to transfer their pensions into fraudulent or high-risk investments.
A review published on Wednesday by the Department for Work and Pensions (DWP) found that roughly 1pc of transfers were given either an amber or red flag in 2022, meaning they “showed signs of scam activity”. This could equate to around 11,000 transfers.
Worryingly, the average waiting time for an advice appointment for these savers increased from an average of two weeks before the new rules came into force to an average of six last year.
Rachel Vahey, of AJ Bell, the pension firm, said: “One pension scam is still one too many, and regulations are an important step in stopping bogus pension transfers.
“But the DWP has to strike the right balance between protecting customers and making sure the majority of pension transfers go through without unfair delays.”
The review found that the most common reason for a transfer to be flagged as suspicious was that the receiving scheme involved investments based overseas.
Scammers often trick savers into moving their money into supposedly high-return investments, in the UK and overseas, which are unregulated or potentially fraudulent.
Recent high-profile examples have involved savers losing hundreds of thousands of pounds in scandals involving Premier FX and London Capital and Finance, which collapsed in 2018 and 2020 respectively.
However Jamie Clark, an analyst at Quilter, the pension provider, said that while the aims of the policy in preventing these scams was important, the definition of overseas investments was creating issues.
“The wording around overseas investments which intends to flag unregulated and potentially fraudulent investments, but instead catches many kinds of legitimate investments in overseas markets,” he said.
“There is a clear divergence between policy intention and the practical application of the law when it comes to the overseas investments wording and this needs to be amended as consumers are needlessly suffering delays.”
The review found that 94pc of transfers were not flagged and were approved without delay. Some 5pc were completed outside the scope of the regulations, while 1pc were flagged.
Transfers with an amber flag require customers to attend a financial advice appointment before the request can be approved, while those with a red flag are blocked.
The average wait for an advice appointment with MoneyHelper, which provides one-to-one meetings with pension savers to advise them on transferring savings, has increased to six weeks, with savers who are looking to consolidate facing even longer delays to secure multiple appointments.
Charlotte Jackson, head of guidance and consumer protection at the Money and Pensions Service, the Government service which runs MoneyHelper, said that the delays were caused by varying interpretations of the new rules by providers.
“We have prioritised keeping waiting times as low as possible by allocating additional resources and we will continue to do so,” she added.
“Our priority is to carry on giving people the help they need to keep their savings safe and avoid the devastation that fraud can cause.”
A DWP spokesman said that the “landmark” regulations were helping protect people from fraudsters.
He added: “We have always said these must strike the right balance between providing the necessary protections for pension savers against scams, while ensuring they still have freedom and choice about where their savings are invested.”
The Government will continue to work with the industry to improve the policy, he said.
