Pension freedoms to be 'open season' for fraudsters

cepheus

Will there be yet another wave of mis-selling in the financial industry? Which? was also warning of a wide range in charges for the early drawdown option, and those who don't shop around could be fleeced by the industry.

The new pension freedoms will be an 'open season' for fraudsters trying to steal people's savings, according to industry experts.

Big changes - which will make it easier to access money in pension pots - are due to happen in one month's time.

But some in the pensions industry are warning that those changes will also encourage criminal activity.

The government is advising people not to take cold calls from fraudsters posing as pension professionals.

http://www.bbc.co.uk/news/business-31762371

kidmugsy

cepheus wrote: »

Will there be yet another wave of mis-selling in the financial industry? Which? was also warning of a wide range in charges for the early drawdown option, and those who don't shop around could be fleeced by the industry.

So what's your view? Because many people are too stupid to look after their own money, nobody should be allowed to?

bmm78

I'm struggling to see the link between:

bbc wrote: »

But some in the pensions industry are warning that those changes will also encourage criminal activity.

The government is advising people not to take cold calls from fraudsters posing as pension professionals.

...and

cepheus wrote: »

Will there be yet another wave of mis-selling in the financial industry?

How is criminal activity by fraudsters pretending to be pension professionals a financial services "mis-selling" issue? Particularly when the industry has consistently warned the government that this could be a massive unintended consequence of the pension reforms?

cepheus wrote: »

Which? was also warning of a wide range in charges for the early drawdown option, and those who don't shop around could be fleeced by the industry.

Anyone incapable of shopping around on charges should not be making the active decision to move into drawdown.

Triumph13

Are they casting aspersions on my excellent opportunity to invest in storage pods for students in the Cape Verde Islands? They're sustainably made with wood from Central American forests and really are a sure fire thing.

Chickereeeee

I wish the media would stop trying to whip up a frenzie. There have been numerous articles, even in the Guardian, along the lines of '..for the first time, you will not have to buy an annuity when you retire....' when that has not (for most pensions) for years. The fraud mentioned by the BBC is from pre-April 6th, which shows it was possible before.

I suppose 'Relaxation of GAD Rules' does not make the snappy headline.
C

agarnett

bmm78 wrote: »

I'm struggling to see the link between ... etc. etc...

How is criminal activity by fraudsters pretending to be pension professionals a financial services "mis-selling" issue? Particularly when the industry has consistently warned the government that this could be a massive unintended consequence of the pension reforms?

Er ... could it be that the criminal activity might not be the sort where the criminal wears a stripey t-shirt, a black eye mask and a bag marked 'Swag' over their shoulder? And that in fact the criminal might be sitting right where you least expect it e.g. in an actuary's office deliberately underquoting a transfer quote, or in a trustees office deliberately undervaluing the schemes' liabilities, or alternatively postponing when they finally complete a long overdue revaluation of their schemes as a whole, or perhaps our criminals are sitting in a DB scheme employer board room negotiating with actuaries (as above), trustees (as above), and outsourced pension administrators on how to do it in the name of "the greater good" i.e. theirs! They don't know they are criminally minded of course, because UK culture now doesn't know very much right from wrong when it comes to boardroom stuff especially.

Else it might be insurance company boards who have already sequestered large tranches of funds in their trust belonging to policyholders and given themselves totally flexible authority on when and if they declare the full value of your fund, especially as it will prematurely mean the public can quickly infer the full value of the bit they have snaffled in the last round of misselling. They can also meantime decide arbitrarily whether they apply reductions on transfer or if they conveniently manage to postpone awarding huge distribution bonuses in which their own shareholders now take a huge cut until after the transfer frenzy has passed?

And could it be the criminal activity of all the above coupled with totally arbitrary delays in handling transfers, or in totally opportunistic hiked fees for handling them while the frenzy lasts.

They will all be breaking FCA principle 6, treating customers fairly, bigtime. That's misselling of transfers, whichever party to it or middleman or consultancy role you think you are involved in.

Anyone incapable of shopping around on charges should not be making the active decision to move into drawdown.

Right, so that writes off most of the workforce then who are working not sitting around thinking of the next scheming wheeze ...

dunstonh

Will there be yet another wave of mis-selling in the financial industry?

Cant see why. The scams we currently have are mostly unregulated companies using unregulated investments. I suspect the same will be the case going forward.

The BBC article you link also indicates it is the non-regulated areas and scams that are the concerns. Not regulated companies.

Which? was also warning of a wide range in charges for the early drawdown option, and those who don't shop around could be fleeced by the industry.

Drawdown has been around for long enough to get an idea of the market and there have been no indications of issues. Although Which? inventing some issues helps keep their media coverage high.

bmm78

Regarding the Which? report into drawdown charges, this can be found here http://www.staticwhich.co.uk/documents/pdf/better-pensions-report---march-2015-397468.pdf.

It hasn't been clearly reported, but they are calling for a "charge
cap for default (internally sold) drawdown products where the consumer does not exercise an active choice".

This is somewhat different from how it has been portrayed in some articles today, which appeared to be suggesting a universal charge cap for all drawdown products.

This proposal raises more questions than it answers.

Should a consumer be moving into drawdown by default without making an "active choice"?

What does a "default" drawdown product look like, and what does it assume that the consumer will do (eg what level of withdrawal, does it assume annuitisation at a later date)?

How does a default drawdown product interact with accumulation defaults such as lifestyling?

How feasible is it do develop a product default that manages risk & volatility, has low charges, and is aimed at a typical fund size of £36,000?

cepheus

kidmugsy wrote: »

So what's your view? Because many people are too stupid to look after their own money, nobody should be allowed to?

It's a policy we accept with hard drugs and firearms.

I think the original drawdown rules required that you still had sufficient means left before allowing the pension to be raided. The present rules mean you could blow the lot then rely on the state to fund your bills. Surely that can't be too popular with this forum?

All that isn't really relevant to the OP though. The point is every time the financial industry is allowed any freedom, misselling or some other dubious activity raises it's ugly head. I'm afraid the financial industry can't be trusted either.

kidmugsy

Chickereeeee wrote: »

There have been numerous articles, even in the Guardian ...

That made me grin.

bmm78

cepheus wrote: »

I think the original drawdown rules required that you still had sufficient means left before allowing the pension to be raided. The present rules mean you could blow the lot then rely on the state to fund your bills. Surely that can't be too popular with this forum?

The forum isn't a single entity with a single voice. There is a wide range of views about the pension reforms.

Personally I agree with the principle, but consider the implementation to have been shambolic and likely to lead to significant consumer detriment.

cepheus wrote: »

All that isn't really relevant to the OP though. The point is every time the financial industry is allowed any freedom, misselling or some other dubious activity raises it's ugly head. I'm afraid the financial industry can't be trusted either.

The OP tried to highlight a potential mis-selling scandal, but instead made reference to the industry warning the government that they have left the back door wide open for criminal activity.

Fraud committed by people outside of regulated financial services is not a financial services "mis-selling" issue, particularly when the potential for that fraud is fuelled by reckless policy making, and it is people within the industry who have been the most vocal and pro-active in trying to prevent it.