The Work and Pensions Committee will investigate pension scams in the first of a three-part inquiry into the impact of the pension freedoms and the protection of pension savers.
Pension freedoms were introduced in 2015 to provide over-55s with greater control over how and when they could access their savings. However, the greater flexibility has led to a rise in the number of scams, official bodies have warned.
According to the Financial Conduct Authority and The Pensions Regulator, 180 people reported to Action Fraud that they have been the victim of a pension scam in 2018, losing on average £82,000 each, although it is thought that only a minority of pension scams are ever reported.
Rt Hon Stephen Timms MP, chair, Work and Pensions Committee, said: “The Government’s shake-up of the pensions system five years ago will have brought new freedoms for people to plan financially for their futures. But on the flip side, more flexibility means more potential for the unscrupulous to take advantage and scam savers out of what will very often be their largest financial asset, crippling their dreams of a comfortable retirement.
“Extra financial hardship brought about by the coronavirus pandemic also provides an added opportunity for tricksters to prey on those people who may be looking to use their pension savings as a form of support.”
The Committee said its inquiry will seek to better understand the scale of the pension scam problem, as well as other types of scams in operation and the role of the pensions industry and public bodies in using current powers against fraudsters,
Trade association PIMFA welcomed the move, particularly amid the financial uncertainty caused by the Covid-19 pandemic.
Simon Harrington, senior public policy adviser, PIMFA, said: “Pension scams have become a significant problem in recent years but in the wake of the Covid-19 pandemic PIMFA has become particularly concerned about the increase in scams aimed at people that might be approaching retirement and have seen significant losses in their pension fund in recent months.
“All too often consumers are encouraged to take money out of their pensions to invest elsewhere. PIMFA feels that the public needs to have more information at their fingertips about the dangers posed by what are often very sophisticated scams. We look forward to contributing to the investigation of the Work and Pensions Select Committee with our recommendations of how to tackle this issue.”
Andrew Tully, technical director, Canada Life, said: “Falling prey to a scam can be devastating not only for the individual involved but also for their family and friends. Sadly, the Covid-19 pandemic has provided a fertile opportunity for ‘lowlifes’ to prey on not only the vulnerable but also people who are worried and anxious about both their health and their wealth.
“Today’s inquiry into scams is urgently needed as our research shows that one in 10 UK adults have either been a victim or know someone who has fallen victim to a scam since the outbreak of Covid-19. That is 5.2 million people.”
The Committee is welcoming submissions to a series of questions until 9 September.
Following an initial focus on pension scams, the inquiry will look at accessing pension savings and saving for later life.
Jon Greer, head of retirement policy, Quilter, commented: “It is clear that the public have embraced pension freedom with open arms. However, we’ve also seen a process of continuous adaptation and amendment over the last five years as extra regulation and legislation has been passed to keep up with the unexpected changes that have emerged out of pension freedoms.
“There are numerous examples of this, with one of the most prominent being the Government’s rather slow introduction of a cold-calling ban designed to protect consumers. The Government should also now consider whether the rise of online fraud and impersonation scams also needs to be addressed in order to ensure consumers continue to be protected to the highest level possible.”
