Almost one in five pension schemes have reported fraud within the past two years, while a quarter of trustees are failing to recognise their responsibility to detect and prevent it, according to research by Baker Tilly.

The findings of the third annual Baker Tilly Pensions Fraud Risk survey show that almost one fifth of pension schemes are still not actively considering fraud risk and half (51%) have not tested their internal controls for over a year - up from a third (35%) last year.

The majority (86%) of defined contribution schemes surveyed had either not tested their internal controls over the previous year or had never tested them at all.

A quarter (25%) of trustees do not realise they are responsible for stopping fraud, up from 16% the year before, while two thirds (66%) say their trustee boards has had no fraud risk awareness training, or did not know if they had.

Baker Tilly's survey found that the level of reported fraud has remained broadly consistent with the previous two years. Larger schemes of more than 10,000 members appearing to be most susceptible, reporting two thirds (64%) of the fraud recorded in the survey, despite only accounting for 26% of respondents. The firm says this could either be because of vulnerability resulting from their size and complexity, or conversely because their stricter governance controls are better at identifying fraud.

The findings also suggest that trustees of third-party administered schemes may be over-relying on their external provider to mitigate fraud risk, rather than investing the additional resources to tackle the issue themselves.

Half (53%) of the in-house schemes which responded to Baker Tilly's survey reported a fraud within the past 24 months. This compares with schemes managed by a third party, where only 2% reported any fraud within the past two years, and schemes that are overseen by a combination of internal and external managers, where 20% reported a fraud in the past two years, but none within the last 12 months.

The area identified by survey respondents as being most vulnerable to fraud is member transactions, followed by accuracy of member data. Transfer values are a bigger concern for this year's respondents, being identified as the third most vulnerable area.

Ian Bell, Baker Tilly head of pensions said: 'There are some encouraging signs from our report as more than 80% of trustee boards are actively considering fraud risk, which is slightly up on last year. However, the approach adopted by some trustees is at best inadequate, and at worst complacent.'