Pension scam models
Many scammers direct members to transfer into single member occupational schemes (known as SSAS) or other occupational pension schemes in an attempt to escape scrutiny.
Your members could lose all of their money and face charges and a tax bill from HM Revenue and Customs (HMRC) for withdrawing their pension savings.
Make sure you signpost your members to the government’s Pension Wise service to understand their options.
Please read and direct your members to our booklet which tells them how to spot a scam. You can download it below.
Most members with defined benefits will have to take appropriate independent advice from an FCA-authorised adviser before transferring their benefits. You might also want to encourage members with defined contribution (DC) benefits to take advice before making any decisions.
Carrying out due diligence
If you have carried out proper due diligence and suspect that a receiving scheme may be involved in a scam you should make sure you communicate your suspicions to the member and record this communication, along with any decisions that they make.
The Pensions Regulator (TPR) can’t predetermine any future regulatory action we may take. However, where the transferring trustees or administrators can provide evidence for concerns that member funds may be at risk, this would be a factor to consider when deciding whether to take action in respect of the non-payment of a transfer.
Neither can we waive a trustee’s legal duty to carry out a transfer within the statutory deadline where the legislative requirements or requirements under the scheme rules are met. We expect the majority of transfer requests to be completed within this timeframe.
If the trustees of a transferring scheme need more time to carry out the due diligence steps in the code of good practice, and if they consider that they meet the criteria for an extension, they may apply for an extension to the normal six-month time period. Circumstances where an extension may be granted include when the:
- member has not taken all steps they need to take to carry out the transfer
- trustees have not been provided with such information as they reasonably require properly to carry out what the member requires
The application for the extension must be made within the six-month time period. It should identify the grounds for the request for an extension, indicate the additional time required to effect the transfer and the reasons why the transfer can’t be completed on time.
Where trustees suspect a pension scam they should consider making such an application as soon as due diligence raises concerns and they consider that the criteria to request an extension are met.
The Pension Scams Industry Group, which includes representative bodies from across the pensions industry, has published a code of good practice that sets out due diligence processes to combat pension scams.
If you find out a member has been scammed TPAS provides a service for people who want to know how they can rebuild their pension savings. They can book an appointment by contacting firstname.lastname@example.org.
Approved financial advisers
The FCA regulates firms and individuals that provide financial advice. Scammers sometimes pose as financial advisers and produce smart brochures and websites that even claim to give warnings about scams. Professional-looking marketing materials are not a guarantee of a company’s authenticity. If someone claims to be a financial or pension adviser then members can check with the FCA to make sure they are authorised. It’s important that members check this before they act on any pensions advice that they receive, in addition to remaining alert to other warning signs of a scam.
The FCA also regulates those responsible for operating SIPPs, personal and contract-based stakeholder pension schemes. If you are concerned that a member of your scheme may have been targeted by a scam, then you can check whether the receiving pension provider is authorised by the FCA.
The Financial Services Compensation Scheme (FSCS) protects consumers who receive bad or negligent advice from a financial adviser who is authorised by the FCA. The FSCS can pay up to £50,000 per claim.
Tax-registered pension schemes
One of HMRC's functions is to protect the tax relief given to pension savings in registered pension schemes. Pension scams put this tax relief at risk.
HMRC has introduced checks on all applications to register a pension scheme and monitors activity throughout the life of a registered pension scheme. If HMRC does not believe a scheme is being set up as a genuine pension scheme, or does not believe the scheme administrator is a fit and proper person to undertake the role, it will not register that scheme. If a pension scheme has not complied with its pension tax obligations HMRC can impose sanctions on it which can include de-registering the scheme so that the scheme can no longer benefit from tax advantages.
If a scheme administrator has carried out due diligence checks on a transfer but still has concerns, they can request confirmation of the registration status of the receiving scheme from HMRC in writing to Pension Schemes Services, HMRC, FitzRoy House, Castle Meadow Road, Nottingham, NG2 1BD.
If the scheme isn’t registered at all, you should not process the transfer.