One of the most pressing financial issues facing people during this pandemic is not understanding their true financial position. Anyone involved in consumer finance knows that lack of understanding, misinformation, anxiety and panic are a toxic cocktail for consumers looking to make sound decisions about their financial futures. In response to coronavirus they are indeed making decisions - some of which may be devastating in the long term.

According to research by Opinium, as a result of Covid-19 one in 16 people between the ages of 40 and 67 have taken money out of their pension pot without seeking financial advice. There is no shortage of research to show that people don’t engage with pensions until very late in the day while others may have inadequate pension provision, oftentimes due to mis-selling. In short, we all know that the public’s understanding of pensions is woefully poor.

That’s why it is so disheartening to see that in the midst of this crisis, more than two-thirds of savers have not had any communication from their providers regarding the pandemic and its effect on their pension funds. According to research from PensionBee, just one in ten said they’ve received support to make decisions about their pensions - in fact most communication from providers has been to warn savers of the potential for delayed responses to enquiries.

With this stark lack of proactive communication from pension providers, it is no wonder that pension scams have skyrocketed. The Pensions Regulator, Financial Conduct Authority and Insolvency Service have all issued recent warnings in relation to an increase in pension scams linked to coronavirus. Furthermore, an FOI request reported this month has shown that HMRC is investigating over 10,000 reports of phishing scams designed to exploit the coronavirus pandemic.

Where providers are failing to communicate, scammers are filling the void. Fraudsters are cashing in on this increased anxiety, persuading people that they can safeguard themselves against continued uncertainty. With legitimate providers doing little to inform their customers of where they stand, people are falling for pensions scams that seem to offer hope and certainty.

As a specialist financial services litigator involved in leading class actions against investment providers both regulated and unregulated, I know the havoc, pain and distress these scams inflict on victims. I have encountered parents terrified of their future, with their pension decimated, giving them nothing to leave their children and further worrying about their own future care needs. I have assisted a broken mother, who, saved a pension pot working multiple jobs only for it to be eroded due to an encounter with a scammer.

I am seeing a rise in emerging unregulated schemes that target unsophisticated investors, and right now persuasive fraudsters are increasingly able to get the ear of investors and talk them into making very bad decisions.

It’s estimated that the government spent upwards of £50m on advertising campaigns for Pension Wise, auto-enrolment and pensions awareness between 2014-18, with seemingly positive results. There seems no better time for providers to come together to help quell pension panic and collaboratively address the misinformation savers are subject to at the moment. Industry-wide initiatives are needed, along with providers being more forthcoming and creating user friendly pathways, whether it be online or in person to ensure their customers are armed with the best possible information so that they can plan wisely.

As Pulitzer-prize winning Charles Duhigg says: “Reform is usually possible only once a sense of crisis takes hold.”

That crisis is here. It’s screaming out that the pensions industry is ready to overhaul its thinking. It’s not rocket science - pension providers need to be much more proactive in their engagement with the public and they need to do it now – until they are it is the bad guys that will fill the void.

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