The number of pension scams has increased threefold over the past year and nearly one in three pension schemes has been affected by fraud, according to research by RSM which suggests problems have escalated since the introduction of new pension freedoms
The firm’s pensions fraud risk report survey shows that among schemes that had experienced fraud, 51% were victims in the last 12 months, while 17% were scammed between 12 to 24 months ago.
Pensioner existence fraud – where benefits continue to be paid to relatives of deceased pensioners – was cited as the top fraud experienced by schemes, and mentioned by 39%.
RSM says the growing trend for the over-55s to retire overseas is making it more challenging for schemes and their administrators to keep up with any changes to circumstances. While families have a responsibility to report a pensioner’s death, evidence suggests this is not always carried out.
Pensions liberation fraud was also highlighted as a concern by over a third (35%) of victims, and 56% of schemes and administrators reported an increase in suspicious member transfer requests since the introduction of new pensions freedoms introduced in April 2015. Overall, 58% have had to consider suspicious member transfer requests.
The survey also pointed to the growing threat of cybercrime, although almost half of respondents were unsure whether their internal controls covered cyber security risks.
In addition, RSM said the survey revealed a worrying level of complacency among trustees. Almost 60% of respondents claimed that fraud was not a significant threat to their scheme, while a quarter failed to recognise that trustees were responsible for the systems that prevent and detect fraud.
Ian Bell, head of pensions at RSM said: ‘Fraud prevention has to be championed at the top but there is evidence from this survey that trustees are failing to take ownership of the issue.
‘Trustee boards must actively consider fraud risk on at least an annual basis and make sure that risk registers are kept updated. They must also be alert to new and emerging threats and ensure there is a robust fraud risk policy in place with appropriate control measures.
‘Generally speaking, there needs to be a much greater recognition of the scale of the fraud problem and a much greater urgency and will to tackle it.’
