Pensions losing £6bn a year to fraud The UK’s pension sector faces a “critical risk” from fraud, and is currently losing upwards of £6bn every year, according to national audit, tax, advisory and risk firm Crowe.

In a new report, the company reveals that private pensions are the most at risk, suffering annual losses of £2.88bn and £1.68bn from investment and payment fraud respectively.

Private schemes lose an additional £330m to payroll and purchasing fraud every year, while government and public sector pensions suffer annual losses of £1.1bn from all fraud.

Crowe said that the pension sector hasn’t fully adapted to “rapidly evolving” threats, with internal fraud, cyber crime and identity fraud the chief risks identified.

“Fraud undermines the value of income for people at a crucial time of life when sources of income are more limited and the chances of financial recovery are reduced,” Crowe partner Jim Gee said.

“A pension, in many ways, represents a life’s work. The industry must better protect the fruits of peoples’ labour, rather than funding early retirement for undeserving fraudsters.”

The large sums of money held by pension funds make them particularly attractive to criminals, and Crowe also found evidence of corrupt insiders investing inappropriately.

Although in a minority, insiders can enable unlawful disclosure of information to third parties, the manipulation or falsification of documents, or the diversion of payments from legitimate pensioners.

Crowe explained how fraudsters also see pensioners as easy targets because they tend to have low levels of engagement with their savings and finances.

It found that identity fraud – where imposters impersonate the real pension holders – has been increasing in prevalence due to advances in technology and the ‘dark web’.

And while all organisations are vulnerable to cyber crime, Crowe found that 25% of pension schemes have no plans to respond to attacks, while just 33% have had scenario-based training.

“Think of the extensive protection the banking sector places around comparatively small sums held in current accounts, versus the less extensive protection around much larger sums in pension pots,” Gee said. “This simply does not add up.

“There are gaps in the resilience of pension schemes and their administrators to fraud and cyber crime. The sector must come together to drive up standards of awareness and preparedness.”

Source: theactuary