The Work and Pensions Committee has just carried out a formal investigation into pension scams.

Six years after George Osborne announced his ‘freedom and choice’ reforms, it is
now surely right to weigh the benefits of unprecedented flexibility for decumulation options against the increased risk of poor decision making and the specific threat posed by scams.

Although PMI’s recent member survey did not report an increase in scam activity during 2020, this may change over time.

With so many people made redundant or furloughed, it would be reasonable to expect many members to experience cashflow problems and for this to lead to attempted liberation fraud.

Particular vigilance will be necessary over the winter months. It is becoming increasingly difficult for trustees to manage suspicious transfer applications and the High Court’s decision in overturning an Ombudsman’s ruling in the Hughes v Royal London case demonstrated that trustees continue to have significantly limited powers in law.

However, there is one proposed change that would do much to address this. The new
Work and Pensions Committee chair, Stephen Timms, has proposed ending the statutory right to transfer.

This principle, enshrined in the Pensions Act 1993, has made it hard for trustees to refuse a transfer application even when they have doubts about the receiving scheme.

Giving trustees the power to refuse a transfer application would not in itself end pension scams, but it would surely represent a significant improvement industry wide.

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