Callcredit Blog

Are new pensions regulations opening up bigger opportunities for fraudsters?

Fraud & Verification

Former Chancellor of the Exchequer, George Osborne, has announced that in April 2017 the government will be extending pension freedoms to those who have already bought annuities, allowing them to take a lump sum without breaking the original annuity contract. According to figures from the City of London police, while the number of pension liberation frauds has gone down, the value of fraud* is on the rise, which could spell trouble for pension providers as the amount of cash taken from savers increases, leaving pensioners without their life savings.

Over the last year it is clear that the pension sector has become more of a hotspot for financial crime; with the new changes coming in 2017 there’s a strong chance that the trend will continue. Over five million pensioners are locked into annuities contracts that could now be at risk, so it falls to pension providers to ensure that they have the right protection policies in place.

Even though pension fraud has dropped by a third compared to the previous year, the value of fraud rose about 30 per cent in all cases, totalling an estimated £13.2m. Coinciding with the change in pension regulation this suggests that criminals have targeted those with larger investments and taken advantage of the pension freedoms change.

On top of liberation fraud, data from the Office for National Statistics indicates direct defrauding of pensioners increased in 2015 by 222 per cent. With so many more pensioners soon able to access their funds this could rise further with fraudsters taking advantage of a position that was created to help pensioners manage their life savings.

Verifying customers

As we move towards a culture of freedom and independence in the pension market place we must consider the risks involved. Allowing fraudsters easier access to large sums of cash and creating additional opportunities isn’t the intention of the legislation, but will surely be made easier by these new rules. A renewed focus on verifying customers effectively by performing robust due diligence should now be a pension provider’s top priority.

Quickly match an identity

Whilst it may be impossible to stop fraud completely, financial crime such as this can be cut dramatically by performing correct due diligence on members. While the status quo of taking a passport and proof of address will allow the criminal to continue to evolve their techniques of defrauding an ever greater pot of money, those who adopt the modern approach of electronic verification systems can quickly and accurately match someone’s identity against a range of data. This allows providers to minimise the risk of fraud to their customers in a controlled and highly auditable way and with the added bonus of reduced costs and a smoother, faster customer interaction.

For more information call me on 0113 220 1616 or email Sean.headrick@callcreditgroup.com

Author: Sean Headrick

*As stated in article published on Money Marketing – Pension liberation fraud falls as crooks target larger savings

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