Nearly one in three pension schemes has been affected by fraud, with victims experiencing a threefold rise in scams in the last 12 months alone, according to the latest RSM survey.
The RSM pensions fraud risk report, published today, reveals that among schemes that had experienced fraud, 51 per cent were victims in the last 12 months, while 17 per cent were scammed between 12 to 24 months ago.
Despite the growing threats facing pension schemes, the survey revealed a worrying level of complacency among trustees. Almost 60 per cent 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.
Pensioner existence fraud – where benefits continue to be paid to relatives of deceased pensioners – was cited as the top fraud experienced by schemes. 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 of victims. Worryingly, schemes and administrators have experienced an increase in suspicious member transfer requests since the introduction of new pensions freedoms introduced in April 2015. However, trustees’ hands are tied as even if fraudulent activity is suspected, they are legally unable to block transfer requests. Their only option is to ensure members have the necessary guidance and information to reach a confident decision. As a result, fraudsters are continuing to successfully dupe more vulnerable scheme members. Figures reported in the recent Autumn Statement showed almost £19m was lost to pension scams in the year to the end of March 2016.
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.
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. In fact, when a quarter of respondents don’t even know that fraud prevention and detection is their responsibility then you know there’s a problem.
‘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.’