Pensions liberation fraud – the Regulator takes action

The Pensions Regulator has recently suspended a trustee (Mr C) after detectives launched a fraud investigation. The Regulator also removed, but did not suspend, the remaining members of the trustee board over concerns it had with the scheme to which they were appointed.

From 2015, a total of £13.4 million was transferred to the Optimum Retirement Benefits Plan (the Plan) from the pension schemes of 288 people. In some cases members were even cold-called to persuade them to transfer their funds to the Plan.

Once members transferred their pension funds to the Plan, as much as 75% of the funds were paid out as loans to members from companies linked to Mr C, with the balance of the funds invested in illiquid, high-risk investments such as gem-mining and olive oil processing. Mr C is also alleged to have received £500,000 from the Plan over a 12 month period. In addition, introducers were paid tens of thousands of pounds in fees.

The Regulator has the power to suspend a trustee who police are considering bringing criminal proceedings against for offences involving dishonesty and deception. The Regulator also has the power to appoint an independent trustee to a scheme if it considers the appointment is reasonable to secure the proper use or application of scheme assets (among other things).

The Regulator’s Determination Panel stated that it was ‘overwhelmingly in the interests of scheme members and for the protection of scheme assets’ for Mr C to be suspended from acting as trustee on any scheme while the police investigation continues. The Regulator also considered it necessary to remove the remaining members of the trustee board and appointed Dalriada to the Plan in their place and in place of Mr C.

A new era?

Since the introduction of pension freedoms there has been an increase in the number of people being contacted by fraudsters and pension scams have become increasingly sophisticated. It is therefore necessary to continue to raise awareness and be alert to the possibility of fraud in relation to transfer requests. This is especially true in light of the government’s recent announcement that the ban on pensions cold-calling will now be delayed until the Autumn of 2018.

The Pension Scams Industry Group has recently updated its voluntary code of practice in a bid to help prevent members falling victim to ever evolving pension scams. The updated code ‘Combating Pension Scams – A Code of Good Practice’ (the Code) applies to all transfer requests and aims to reflect how the tactics of scammers have evolved. All those involved in the pensions industry and the payment of transfer values should familiarise themselves with the Code and ensure that they follow its recommended practices.

What can be done?

Whilst the pensions industry will have to wait further for the details of the cold-calling ban before we can evaluate how effective this is likely to be, trustees and administrators should ensure they continue to warn members of the risks of pensions liberation fraud. However, as recent ombudsman cases have illustrated, members have a statutory right to transfer their pension savings which cannot be restricted where the requirements of a statutory transfer have been met and the necessary warnings have been provided. In such cases maintaining an audit trail of the steps taken and the warnings given will be vital.