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GUEST BLOG: Does pension freedom increase the risk of frauds and scams?
Guest Blog from Malcolm McLean
The old saying that 'there are lies, damned lies and statistics' has been shown to be all too true on numerous occasions in the past, so we should be careful about jumping to instant conclusions on a set of single figures.
Nevertheless, a few eyebrows were raised recently when the City of London Police revealed that pension fraud worth £4.7million had been reported by members of the public in May – a big jump from the losses of £1.4million reported in April and £932,000 in March - effectively tripling the amount.
As the increase came just one month after the introduction of the new pension freedoms in April there was a natural inclination to want to link the two events together, although the Police were quick to point out that it was too early to conclude that the increase was as a direct result.
In making a comment to the Financial Times, who were responsible for unearthing the figures from the police, I said that the big spike in losses was extremely disturbing and gave weight to earlier fears that the new pension freedoms might open the door to increased fraud activity. I suggested that the fraudsters were fully aware that many older people now had ready access to large capital sums and were potentially soft targets as a result.
"Rises could be due to a number of factors, such as increased industry reporting or rising awareness"
The immediate response from the DWP was perhaps predictable. They said that one month’s data of reported losses should not be taken out of context or wrongly described as a spike and rises could be due to a number of factors, such as increased industry reporting or rising awareness. This general message was subsequently further reinforced by the Pensions Minister, Ros Altmann, who said in a radio interview that she was not convinced pension freedoms were responsible for the increase. Ros said that it could be because of increased public awareness and the time-lag before people realised they had lost their money and began to report it.
I hope they are right, and that subsequent results when they become available, confirm this as fact. The new pension freedoms command general support and are very popular with the public at large. Despite some rough edges that need to be smoothed down they are clearly here to stay and it would be a great pity if the scammers won and the image and reputation of the new arrangements suffered as a result.
We must hope that the multi-agency group (including police and regulators) which has been set up to tackle pensions fraud continues to do its job and helps to raise awareness of the true extent of the problem and the risks individuals are facing. A zero tolerance policy on prosecutions would also be helpful in bringing proven fraudsters to justice and as a deterrent to others.
