First I’d like to thank your chairman, Mr Gallagher, for inviting me to speak here today.
For the last couple of years, my colleague Mike Broomfield has spoken here at your conference. As TPR’s Head of Intelligence, Mike is deeply involved with the multi-agency Project Bloom, and he has given you an update on Project Bloom’s scam awareness activity.
Project Bloom is a really important way that we get our messages out about scams, and as the Director of Communications at TPR, I’m happy to be here to talk to you about this key part of our communications work. I know that combating scams is something all of us here care a great deal about. Today I’d also like to talk to you about TPR’s position and thoughts on the SSAS industry, on pension transfers, and on what more all of us here can do to help combat scams.
Small self-administered schemes (SSAS)
Earlier this year, our then Executive Director of Regulatory Policy, Andrew Warwick-Thompson, wrote a blog post proposing that the government introduce a package of measures to help trustees stop scams. The purpose of his post, as with all our blog posts, is to raise questions on topical issues and provoke debate across the industry. And Andrew’s post certainly did that.
I’d like to make it clear today that we are not against small self-administered schemes (SSAS). These schemes are a valuable part of the pensions landscape. They provide a flexible and tax efficient way for the self employed and small businesses to save and invest their money. We do not propose a ban on SSAS. We do not propose a ban on transfers into SSAS.
However, we do know that the nature of the product means that they can be an attractive option for criminals to target people's savings. And we do have concerns about that.
We’ve just heard from Robin Ellison about his thoughts on regulation and the right to transfer. We both agree on the challenging position trustees can be in. We don’t agree on everything.
In truth, at TPR, we are being urged by the majority of our regulated community to be clearer, quicker and tougher in the way we operate. And indeed we are evolving in that direction. We’re being much clearer with trustees and employers now about what we expect from them. We’re intervening more quickly. And we’re being tougher on schemes and trustees when our expectations are not being met.
We focus on the things we care about and tackling scams is clearly a concern for all of us here, not just us as a regulator, but also you as the people running and managing SIPPS and SSAS.
So let me state clearly now what our position is when it comes to SSAS and transfers.
Our view is that members should be helped to avoid transferring their retirement savings into risky schemes or scams. To that end, we welcomed the new measures announced by the government to ban all cold-calling in relation to pensions, including emails and texts. This gives a strong, simple message to consumers that if they do receive a cold call about their pension, it will be from an untrustworthy source and they should ignore it or report it.
Likewise, we believe that trustees and scheme managers should be helped. As Robin said, they can find themselves in a really tricky position when it comes to transfers – on the one hand they are told to carry out due diligence to make sure they only make transfers into legitimate receiving schemes. On the other hand, they have been held to account by the courts if they refuse to make a transfer into what they think is not a legitimate scheme.
The trouble is that the law on what constitutes a legitimate occupational pension scheme is unhelpfully drafted.
The consultation suggests that transfers might continue to schemes which can demonstrate an earnings link with a sponsor. However, our experience of trying to support trustees and scheme managers in this area suggests that this is not practical without significant legislative change, to both pensions and tax law, because the definitions in each branch of the law are misaligned.
So we believe that to help trustees, their advisers and schemes managers in this area, the government should consider changing legislation so that the statutory right to transfer doesn’t apply if the receiving vehicle is a SSAS.
And thirdly we think that the statutory right to transfer should be restricted to a safe schemes list – and that this list be made up of authorised master trusts and FCA-regulated products.
Many of you will know from the government’s response to the consultation that they agree with the concept of a safe list, albeit with a wider parameters than ours. I’ll come back to the government’s position shortly.
The benefit of a safe scheme list would be that it’s clean and simple, it answers the legitimate calls from trustees and scheme managers to drastically reduce the burden and cost of due diligence which they currently shoulder. And it means that consumers can be confident in the safety of their scheme.
Furthermore, it would be easy and cheap for trustees and scheme managers to check which schemes and providers are on the list – the FCA already publishes information about its regulated providers, and we will be publishing a list of all master trusts that we authorise after the implementation of the Pension Schemes Act.
We are not interested in blocking legitimate transfers. We are not proposing banning SSAS or banning transfers to SSAS. Nor are we suggesting banning transfers into schemes which are not on the list. Instead we’re suggesting a shift of balance of proof to the member and the receiving scheme administrator. So they would need to convince the trustees of the ceding scheme that the transfer was safe.
We’ve had requests for a long time from trustees and their advisers to be able to block transfers where they feel the receiving scheme is suspicious. They want us to reduce the burden of due diligence which currently falls on them and the scheme sponsors.
We do work closely with government and we’ve made our views known to the government on this front – but of course TPR cannot change the law – any decision to make changes to legislation will have to be made by Parliament.
I mentioned the government response to the consultation earlier, which was published in August. You will have seen from that, that they have in fact decided on a ‘safe schemes list’. In addition to schemes operated by FCA-authorised firms, and authorised master trust schemes, the list will also include any scheme where the transferring member can demonstrate an employment link to the receiving pension scheme. This provision will likely include many of the schemes that you, as AMPS members, operate.
In addition to this, the government is looking to strengthen the link between pension scheme and employer in registering schemes. The consultation response indicated that pension scheme registrations will need to be made through an active company, and the government is looking to give more powers to HMRC around registering and de-registering schemes with a dormant sponsoring employer – proposals I am sure most of the pensions industry will be supportive of, and on which we will be looking to support HMRC implementing.
I’d like to give you an update now on scams and what we can all do to combat them.
First a few statistics:
Recent research by the Money Advice Service suggests that there could be as many as eight scam calls every second – the equivalent of 250 million calls per year. Citizens Advice has calculated that 10.9 million consumers have received unsolicited contact about their pension since April 2015.
In the financial year 2015-16, there were 30,000 ‘defined contribution’ scheme transfers. This represented £1 billion of assets. Xafinity Pensions Consulting estimates suggest that fraudsters could be behind as many as one in 10 pension transfer requests.
Individuals reported nearly £19 million in suspected pension liberation fraud between April 2015 and March 2016 – this was twice as much as for the same period in 2014-15, and and it may be that the actual amount of pension fraud is considerably higher due to cases that go unreported.
We are working closely with government, as you know, as well as with other enforcement agencies, through Project Bloom, which TPR leads, and through our Scorpion campaign to help the public protect themselves from scams.
We are also taking our own action. Earlier this year we banned three people from acting as trustees of pension schemes over suspicions that millions of pounds were scammed from investors using schemes of which they were trustees.
These people showed a disregard for their obligations resulting in scheme assets being gambled on high risk investments that are now worth a tiny fraction of what was put into them.
We have also alerted the public to rogue pension websites carrying anti-scam messages to try to trick consumers into believing that they are legitimate businesses.
Before I wrap up, let me say a few brief words on the subject of transfers from defined benefit (DB) schemes.
We are of course closely involved in the debate around whether pension savers should leave a DB scheme to take advantage of pension freedoms, and what trustees and employers can and cannot say to staff without being 'on the hook' for advice.
Our primary concern is that scheme members and their advisers have all the information they need to make an informed decision about what is in the best interests of members.
We are working closely with the FCA to achieve this and just last week we published a new joint guide for employers and trustees on information they can provide about financial matters without needing to be subject of regulation.
I’d like to wrap up by repeating that TPR is evolving to become a clearer, quicker and tougher regulator. Our role is to protect workplace pensions, to protect the scheme members – including vulnerable members – and to ensure that their savings are safe.
So preventing scams is very high on our agenda, and indeed for all of us in this room. And it’s important for all of us to explore every option available to us to stop SSAS being used as a vehicle for scams.
Liz Hickey, Director of Communications