As times get tougher, retirees are taking some shocking steps to improve their income. A new report has revealed that the number ripping off their company pension has soared 55%. Now almost one in five companies say they have discovered one or more people trying to commit fraud.
So what's going on, and why is this such a dangerous business?
HikeBaker Tilly carries out annual surveys looking at pension scheme fraud. In 2011, 12% of respondents said their scheme had suffered fraud within the last two years. This year, the figure jumped to 19%. "We have to remember that these figures are only talking about fraud that has been detected and reported," says Ian Bell, Head of Pensions at Baker Tilly. "Much more fraud is likely to be going on that simply isn't detected, or just as concerning, that has been detected but not reported."
Rosalind Wright, chairman of the Fraud Advisory Panel, said: "It's shocking, but not surprising, to see that the figures for fraud in pension schemes have shot up this year." The Pensions Regulator warned back in 2009 that we would see these sorts of patterns as fraud increased in the recession.
What is going on?By far the most common kind of fraud is what it calls "misappropriation of members' data". This can include the most well-known type of fraud where a pension continues to pay out after the death of a member, and their family cash in rather than owning up.
In tough times, it may be tempting for families who are otherwise law-abiding to fail to inform a scheme of the death of the member. When little or no money is coming through the door each month, it could be harder to turn down a paycheck.
It can also include far more orchestrated types of fraud, such as the staff administering the scheme setting up ghost members and taking the cash for themselves, or financial advisers inflating transfer values. The rise in this sort of fraud may well be to do with the fact pension schemes are seen as relatively easy targets for gangs as other kinds of financial companies tighten their procedures.
VictimsLarger schemes, those with over 10,000 members, appeared to be the most vulnerable, accounting for 70% of frauds reported in the survey. This may mean that they are considered an easier target by criminals because the schemes are more complex and therefore harder to keep an eye on, or could mean that those who are defrauding the scheme see it as a victimless crime because the corporation behind the scheme is relatively faceless. Alternatively it may mean these bigger schemes are better at spotting fraud.
Of course, these are not victimless crimes. The company and the individual may be forced to pay more into the scheme to cover the costs of fraud, and in the worst case scenario a company can be brought to its knees by the pension scheme.
PunishmentFor those who are tempted, the consequences can be severe. According to Lansbury Worthington solicitors, those making dishonest claims for financial benefit may be investigated by the police, and prosecuted under the Fraud Act 2006. The punishment can be up to 10 years in prison.
If it's someone working within the pension scheme that is breaking the law, again they are committing an offence under the Fraud Act 2006, and the punishment can be up to 10 years in jail.
As companies try to cut their costs and clamp down on risk, the focus is being thrown onto fraud prevention and prosecution. Some 79% of companies have considered anti-fraud measures in the last 12 months, and 65 have tested their risk controls in that time - meaning that the vast majority are clamping down on fraud.
This falls far short of what the industry would like to see, but it still makes life as a pensions fraudster a very difficult and dangerous one.