Official figures are vastly underestimating the extent of fraud. That is also the conclusion of the NAO, at least in its seminal 2017 report.
It estimated that less than 20 per cent of incidents are reported to the police. Why bother, when bodies like Action Fraud do not promote the reporting of every minor transgression?
Easy pickings
IFAs know well that the lowest hanging fruits to fraudsters are pension pots.
Indeed, Gary Evans, now retired and then head of third party administration at Hymans Robertson, told me a while back: “Before 2006 [a meaningful investigatory process] changed to one of HMRC registering any scheme that asked [a rubber stamp] from 2006. Effectively HMRC stopped checking for fake schemes and became a rubber stamp for any scheme.”
Even though HMRC introduced more stringent checks in 2013 and 2014, essentially to protect tax relief rules for pension schemes (including ‘fit and proper' checks of pension scheme administrators), too many pension frauds are still occurring.
HMRC is, in my view, not helping. Its apparent all-too complacent attitude is at odds with the more forensic approach of The Pensions Regulator.
HMRC disputes this: “It has never been our role to regulate pension schemes. Schemes register with us for tax purposes only and registration is not a form of endorsement.”
Speaking to FTAdviser, one of pensions most experienced experts Lesley Carline, director at KGC Associates and immediate past president of the Pensions Management Institute, points out that "There is an assumption that if it's registered for tax, then its bona fide. This makes pensions vulnerable to fraud.”
Despite HMRC’s claim that registration is no endorsement, to the ordinary person on the street, it is a seal of approval that everything is above board.
Should HMRC allow its good name to be associated even at one step removed with fraudulent schemes? 'No', is the only answer.
Clearly HMRC is not getting the message across that its registration role is simply for tax relief purposes and far from any guarantee that your money is safe .
Be on your guard. Carline so rightly stresses: “Trustees need to be aware of the connectivity which makes them vulnerable in our digital lives. For example, if there is a cyber leak it might be at the bank account level not the administrator.”
It is all so easy to steal. Not just in pensions but in all types of fraud. Anyone can set up a limited company with the most cursory of checks. All you have to do is just pay a £12 incorporation fee, and with ‘off the shelf’ companies, you can get a certificate of incorporation within hours. No checks at all.
