REGULATORS have promised tough action to reduce the number of Britons who become victims of pension scams.
The markets watchdog has warned financial firms that they could be fined for improper use of unauthorised introducer firms which provide access to clients.
A large number of financial firms have accepted business leads from ‘introducers’ or unregulated firms, or people such as retired financial advisers, who are no longer authorised themselves to give advice on products.
The Financial Conduct Authority (FCA) has issued an alert saying it was very concerned about the increase in cases of introducers having inappropriate influence on firms who sell products like pensions.
“An authorised firm which accepts business from an introducer must meet its regulatory requirements,” the FCA said in a statement. “If customers are given unsuitable advice by an introducer, the authorised firm may be held responsible for this and subject to regulatory action.”
The FCA said many of the authorised firms it visited did not have proper control over the advice they are ultimately responsible for, such as the transfer of pensions.
“We have specific concerns where this advice involves movement of pension pots to unregulated, high risk, illiquid products, whether they are based in the UK or overseas,” the FCA said.
The watchdog told firms it was coordinating its supervisory activities on pension scams and will take action as necessary.
“It will be you and your firm against whom regulatory action will be taken, and there is also a risk that you may become involved in an illegal scheme,’’ the FCA said.
The FCA highlighted a number of areas of concern. For example, some introducers might use authorised firms’ firm reference numbers (FRN) in obtaining consumer policy information. They may then request that the information is sent to them as an administration office, the FCA said.
The FCA said: “This can result in policy information being passed to persons with no right to it, and the authorised firm having no control over how that information is used.
“Many of the investment outcomes facilitated by the introducer are without Financial Services Compensation Scheme and Financial Ombudsman Service protection and, in our view, are not suitable for retail clients.
“Some of these investments are closely linked to or controlled by the introducers, and are badly run, while others may be outright scams.”
Which?, the consumers’ organisation, is also concerned about the rising number of fraudsters who have been targeting people under 55 and encouraging them to access their pension early.
Figures released by City of London Police showed that, in the 12 months to February 2016, £13.2m was lost to ‘pensions liberation’ scams – an increase of 26 per cent on the previous year.
A Which? spokesman said: “Pension liberation schemes target people under 55 and encourage them to withdraw or transfer their pension savings.
“However, pensions are designed to only allow savers access to their money after they turn 55. Accessing pensions savings before 55, unless in exceptional circumstances such as ill-health, is not permitted and consumers face losing up to 70 per cent of their pot as a tax penalty. And yet we found that companies offering early pension release for those under 55 are clearly advertising their services online.
“These sites offer early access to pension savings, potentially exploiting consumer confusion with the new pension freedoms, and don’t explain the huge losses at stake, often charging exorbitant fees.”