Section 16 of the Pensions Act 2004 allows The Pensions Regulator to apply to the High Court for a restitution order, requiring those who have been involved in the misuse and misappropriation of pension scheme assets (whether dishonestly or otherwise) to compensate the schemes for the losses suffered.
On the 23rd January 2018 the restitution order was granted and now the trustees of the schemes who were appointed by The Pensions Regulator in 2014 can go after the assets of those involved in the scams. How much will be recovered is obviously yet to be determined but this is a step in the right direction and should be a warning to other potential scammers.
In many cases like this one, pension scams target those that have the most to lose because they have little else to rely on in retirement. The scams promise money upfront and guaranteed returns, which to the trained eye would clearly be unachievable.
However, those targeted were convinced by promises of cash in their hand now, not taken from their pension, as well as increased funds in retirement which, when you don’t have a lot now, could seem a great solution. Without regulated financial advice the pension members where not to know this wasn’t normal and that they may never see their money again.
This could have just been the tip of the iceberg and many pension members will have been saved from themselves by their original pension provider conducting due diligence on the receiving scheme and stopping the transfer.
In one example given by the TPR the scammers eventually gave up when asked too many questions by one provider, unfortunately this didn’t entirely protect the individual because other funds were transferred. It is also clear that in some cases the warnings given to members weren’t enough to prevent funds being transferred to these schemes because the sales pitch had been so convincing.
Overall this is clearly a great move to put fear into scammers but there has to be a better way to prevent this happening in the first place. I do believe that there is a greater understanding of scams by the general public now and good upstanding pension providers are doing their best to protect their clients without causing unnecessary delays on all transfers - but is this all enough?
Claire Trott, Head of Pension Strategy, Technical Connection Ltd