The UK is facing a pension fraud crisis that could see millions scammed out of their life savings, according to research.
A report by data and technology specialist LexisNexis Risk Solutions, Pension sector faces looming fraud crisis, warns that, as digital pension services come online, pension holders’ greater access to cash from retirement savings is leaving them vulnerable to scams.
Most schemes are implementing digital access for customers as part of the shift to pensions dashboards. However, LexisNexis’s report reveals that only 29% have implemented any electronic ID verification processes, while 43% have not tested their resilience to cybercrime.
The research urges pension providers to introduce more robust fraud and identity checks upfront in their digital services. It warns that schemes that fail to offer multi-factor authentication, multi-layered device and biometric intelligence at login could be allowing fraudsters to access member accounts.
It also notes that trustees are not currently accountable for protecting members from fraud, while regulators have yet to create rules and obligations around fraud and identity protection for workplace pensions. Many schemes' existing fraud prevention measures come too late in the online customer journey to protect members.
“Most pension providers wait until the transfer of funds stage – where the loss of funds is most likely to occur – before undertaking serious identity verification or fraud checks,” said LexisNexis Risk Solutions head of identity strategy Mark Little. “For better risk mitigation, fraud and identity checks need to take place early on in the process, to provide robust assurance that providers are dealing with a legitimate customer.”
