Martin Tilley: How education can tackle pension scams

The dark reality of pension scams is that we don’t really know how common they are. Fraud is a crime which tends to have low reporting events and with pension scams, it’s no different. The emotional toll can be as large as the financial, with some people being too embarrassed to report that they have been the victim of a scam. In 2023 alone, a total of £17.7m was reported as lost to pension fraud, averaging £47,000 per case. Added to this, the FCA estimates that only 20% of fraud cases are actually reported. With pensions, it can take years for a fraud to come to light, during which time the fraudster is long gone over the horizon. There are red flags which the FCA encourages consumers to be aware of to spot a pension scam, including unsolicited offers, guaranteed returns and high-pressure sales tactics. But for many consumers, they may not have enough knowledge of pensions or investments to evaluate an offer for scam red flags before committing. I was pleased to see television adverts highlighting retirement scams and the recent inclusion of a scam in a soap opera, over 10 years after I originally suggested it! The Pensions Freedoms have undoubedly made savers more vulnerable, in that individuals who in the past would have been members of defined benefit schemes are now managing their own pensions pots. And the moves away from lower-value customers as they become unprofitable to service by the pensions and investments industry means that that vulnerability has become compounded. This primarily comes down to education. I’m a long-term advocate of better financial education in schools. While this includes pensions, it should also include topics such as tax, mortgages, savings and insurance. Not only would a base financial education provide support in identifying potential scams, it would also support with being able to identify misinformation – which itself can be a driver in pension scams. Social media fuels misinformation, offering an opportunity for anyone to voice their guidance or opinions with very little in the way of censorship or fact checking to an impressionable population. Financial education would also support in increasing engagement with pensions and increased levels of consumers seeking financial advice. The reality is that pensions are already complicated enough. The constant flux of regulations, coupled with the sheer volume of terms and jargon, as well as differences in interpretation of rules between providers. Without the addition of financial education to the school curriculum and requirements on employers, providers and trustees can only do so much good. The matter is not helped by pensions being used as a political football. Recent governments have introduced significant changes to pension rules, which have resulted in uncertainty over long term stability. Creating an understandable and accessible pension system is critical to supplement financial education and build trust and understanding with pensions – thus reducing the risk of scams. Consumers with even a base understanding are more likely to recognise when they need to obtain financial advice and where to get it. This base understanding also supports making the role of financial advisers easier, as clients will not need significant education alongside advice. Fundamentally, the Government must do something to improve the financial literacy of the UK population and offering education in schools is a positive step forward. I would look to build on this with requirements on employers who operate auto enrolment to provide basic financial education to their employees. Strengthening financial literacy ultimately shields retirement savings, allowing clients to achieve their financial goals and quality of life in retirement. Martin Tilley is chief operations officer at WBR Group martin.tilley@wbrgroup.co.uk

Martin Tilley: How education can tackle pension scams

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