In his latest guest blog for us, Martin Tilley of Dentons takes a swipe at those people trying to scam and con you out of your hard earned pension pot.
There are many reported instances of “cons” taken from the phrase confidence trickster dating back centuries, but the first chronicled use of the word “con man” appears in the trial of William Thompson, a New Yorker who persuaded his targets to lend him their watch for a day, before disappearing never to be seen again.
There will always be those who try and trick others out of their wealth, rather than earning it themselves and without doubt, cons and scams have become far more sophisticated over time as targets’ trust has become more difficult to obtain. Like a virus, these conmen mutate not only their wares, but the targets they approach. The common element is simply a pot of money.
Promoters of some unregulated investment products are a case in point.
An ideal time for scammers and con artists
Low interest rates and volatile conventional investment markets might be the trigger for consumers, disappointed at poor returns and scammers have played on this, persuading thousands of pension savers to move from perfectly good regulated pension schemes into SIPPs (Self-Invested Personal Pensions) which previously may have accepted these rogue investments, some of which in hindsight had little if any substance.
When SIPP operators became more aware of these processes and were alerted to concentrations of this business, the scammers tried to spread the investments through many IFA’s (Independent Financial Advisers) and to various SIPP firms. However, SIPP operators’ then tightened their procedures and indeed the Financial Conduct Authority (FCA) took steps to prevent the misuse of SIPPs, effectively cutting off this source of funding. Scammers took little time to rearrange their pitch to continue to promote their investments but this time to also introduce to their victims the Small Self-Administered Scheme (SSAS), another pension vehicle, more complex to arrange but importantly, perceived as being less well regulated and controlled.
The Pensions Regulator, which does regulate SSAS and HMRC are however already aware of the potential misuse of SSASs and the latter has introduced legislation requiring a “fit and proper administrator”, which will be a party responsible for the tax affairs and reporting of each scheme. Banks have joined forces, in many circumstances refusing to establish accounts for schemes unless a recognised professional administrator is in place. One hopes that this role whilst not specifically tasked to prevent inappropriate investment, might at least raise suitable warnings. Scammers can see another door closing as the result of regulatory and professional bodies’ intervention.
So where will the next mutation take the scammers?
Perhaps where there is no regulatory or professional body to intervene and a window has just been opened by the pension reforms introduced by the Government. Whilst the freedom afforded by these proposals, due to come into effect from April 2015 is to be applauded, they do have the potential to put individuals in receipt of not only their tax free cash sum, but the rest of their pension pot, albeit the latter subject to some tax. Enter the opportunity to promote unregulated investment to these individuals directly, that needs no regulatory or professional body to approve the individuals own person investments.
Whilst, this may be the case, we do have the opportunity to educate these individuals and inclusion of a warning in the proposed guidance guarantee, to be made available to all individuals intending to draw from their money purchase pensions, would be a good place to start. The FCA has recently published a guide: www.fca.org.uk/consumers/scams aimed at helping consumers identify scams and to prevent them being duped into losing money. The guide recommends approaching a regulated adviser if in any doubt.
Less consumers falling prey to these individuals can only be a good thing, but it requires the combined efforts of the financial profession bodies to be not only reactive but proactive to the ever evolving world of the scammer.
Note: This article reflects the view of the author. It does not necessarily reflect the view of Investment Sense Limited. The article has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author.
About the author
|Martin joined Dentons in 1988 having spent time with Sun Alliance and Crown Financial Management and is responsible for pension technical support to intermediaries and media relations at Dentons. He qualified as an Associate of the Pensions Management Institute in 1994 and is an authorised and regulated individual with over 30 years experience in the self invested pensions market. Martin is a regular commentator on self invested pensions and industry issues and spends much of his time presenting to advisers about key industry changes and opportunities in the pensions market.|