Global tech firms such as Google should be held to account for hosting pension scam adverts with legislation needed to stop them profiting from a multibillion-pound scam industry, the Work and Pensions committee has said
A report from the Work and Pensions Committee calls on the government to 'act quickly and decisively' to protect pension savers, more than five years on from the introduction of the pension freedoms, which have put people at risk of a much wider range of scams and fraud.
The report warns that commonly cited figures of the scale of pension scamming are likely to substantially underestimate the problem. The Pension Scams Industry Group estimates that £10bn has been lost by 40,000 people to pension scams since 2015.
The situation is likely to be getting worse rather than better, with the covid-19 pandemic offering scammers new opportunities.
The Committee heard throughout its inquiry that pension scammers have moved online, with regulators powerless to hold search engines and social media to account for hosting scam adverts as they do traditional media.
Tech firms such as Google are accepting payment to advertise scams and then further payments from regulators to publish warnings – a practice the Committee describes as 'immoral'.
The government must now rethink its decision to exclude financial harms from the forthcoming Online Safety Bill and use it to legislate against online investment fraud.
In the same way as traditional media, online publishers should be required to ensure financial promotions are authorised.
The report also calls for the multi-agency task force set up to tackle pension fraud to be strengthened.
The existing Project Bloom should be renamed the Pension Scams Centre and given dedicated funding and staffing to manage an intelligence database and law enforcement.
Currently the fragmentation of reporting, investigation and enforcement has made tackling pension scams more difficult.
The Financial Conduct Authority must also 'raise its game' and publish information about its enforcement action, with the Committee hearing numerous criticisms that it is not effective in stopping scams, punishing scammers or retrieving scam proceeds.
Stephen Timms MP, chair of the Work and Pensions Committee, said: ‘The pension freedoms brought more choice for savers on how to use their pension pots, but the reforms have also opened up a whole new world of opportunity for scammers and fraudsters.
‘At the same time, a woeful lack of online regulation has helped them reach more people than ever before.
‘With global firms such as Google being increasingly influential as providers of information, consumers looking for financial advice are being let down by not being afforded the same level of protection they receive from adverts which appear on television or in a newspaper.
‘There must now be parity across the media to ensure all adverts are regulated and the government should use its Online Safety Bill to act.
‘Tighter online regulation must be just the first step in improving protections for savers. Stronger enforcement with a new Pensions Scams Centre, a more effective FCA and extra support for victims are also desperately needed.
‘The government and the regulators have been left playing catch-up following the pension freedom reforms and must now act quickly to protect savers and their hard-earned money.'
The Committee welcomes the provisions in the Pensions Schemes Act 2021 that will allow people's statutory right to transfer their pension scheme to be restricted where there is a sign of a pension scam. A review of the system of red and amber flags (to block or pause a transfer) should be published within 18 months of the regulations coming into operation to allow any further legislative changes to be made.
The Committee is currently carrying out the second part of the inquiry, which is focused on accessing pension savings.