Buck Bond Group

Winning, and losing your pension benefits.

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The Financial Conduct Authority (FCA), in giving evidence to The Work and Pensions Select Committee, perhaps unwisely said that it can’t “stop fools acting like fools”. The Chair of the Committee criticised the FCA for this, questioning its willingness to be proactive to protect savers. Whilst it may not have been a smart thing to say publically (and most of those who have lost their pension savings to scammers are not fools but, with hindsight, acted foolishly) there are some who have sympathy with the FCA, and other regulators, when they are trying to police pension scams.

Despite a long running campaign against pension scams, there is a steady flow of individuals who continue to fall for charm and patter of fraudsters. Whether it’s bogus receiving arrangements or questionable offshore investments promising eye watering returns, greed in many cases overcomes common sense. Promises of cash lump sums or returns of 8% or more seem to cloud the good sense of otherwise rational human beings. But what happens when it all goes wrong and they realise they have been conned?

Mr Winning had two pension pots with the Legal & General and Scottish Widows, two very reputable companies where his pension pots were apparently safe. At this point you could say he was winning! He decided to transfer these pots in accordance with his statutory right to do so to the Capita Oak Pension Scheme. I don’t know what was said or promised to persuade him to make the transfers. Unfortunately, all was not well and the Capita Oak Pension Scheme turned out to be a suspected pension scam arrangement. Mr Winning said he thought the Capita Oak Pension Scheme was legitimate because HMRC had registered it. History is unfortunately littered with scam pension arrangements registered by HMRC. Moreover, whilst HMRC have recently tightened up their registration process, it will never be fool proof with fraudsters continuing to find ways round the system. Having apparently lost his pension benefits, Mr Winning sought to blame not himself, but HMRC for registering the scheme and, the Legal & General and Scottish Widows for making the transfers on his instruction to the Capita Oak Pension Scheme.

In his judgments issued earlier this April, the Pensions Ombudsman quite rightly concluded that Legal & General and Scottish Widows had done nothing wrong and had not committed maladministration. They were faced with a member who was exercising his legal right to make a transfer and a receiving scheme which was both registered with HMRC (over whom the Ombudsman has no jurisdiction) and willing to take the pension benefits. Providers and indeed trustees cannot be expected to conduct in depth examinations of receiving arrangements chosen by members to guarantee they are legitimate. Hundreds of transfers are made each day and those running schemes don’t have the time, money or resources to check each receiving arrangement to ensure it is legitimate.

Moreover, even if they could, investigating every scheme about which you know nothing would bring legitimate transfers to a standstill and make the transfer system unworkable. Members wanting to make transfers to pension arrangements not run by well-known companies or their employer need to take some responsibility for checking their legitimacy before they exercise their statutory right.

Unless a transferring scheme has reason to suspect a receiving scheme it is only ever going to pick up on a fraction of scammers. Moreover, even when we are convinced a member is making an unwise choice, it’s remarkable how often the member (no doubt still convinced by the scammers’ story) insists on making the transfer and not taking our express advice in such cases to consult an adviser authorised  by the FCA or telephone The Pensions Advisory Service (TPAS). In such cases, the member’s right to make a transfer overrides any misgivings a transferring scheme may have about the transfer.

Mr Winning ended up losing: both his pension benefits and his subsequent claim to lay the blame at someone else’s feet. The moral of the story is that if you fall for promises of immediate cash returns, or not to be missed investments with eye watering returns often in overseas investments, without checking with an FCA registered advisor or TPAS, then you really only have yourself to blame. Or as the FCA would put it you can’t “stop fools acting like fools”.