My £1m pension was sent in the post by cheque — and stolen

How did this happen?

James, 65, from Market Harborough in Leicestershire, had built up his pension pot after more than 35 years running a business importing and exporting lithium batteries. He had been saving into a small self-administered pension scheme, a type of workplace pension often used by business owners. It was managed by Suntrust Ltd, which is part of Aviva.

Last year he was making plans to retire and his financial adviser suggested that he transfer his pension, which was held in a Barclays account, to a self-invested personal pension with the established firm Transact, which would make it easier for him to draw on his funds.

Aviva required the transfer to be made by cheque to Transact’s NatWest bank account. About this time, in July last year, Transact said it was issuing public warnings that scammers were intercepting cheques, doctoring them and cashing them in. It urged pension firms and banks not to use this method of transfer.

Stuart James

Transact did not provide any evidence of the “interceptions” to the Sunday Times, but fraud warnings are prominent on its website. Industry sources said that pensions transfers by cheque were extremely rare. Romi Savova from the pension firm PensionBee said: “The use of post is a well known risk in the industry for firms that don’t use electronic transfers. There is no requirement to use electronic transfers.”

In December James did as instructed and wrote a cheque from his Barclays account to Transact’s NatWest account. It was to be paid into an account with the name Transact Client Account. He signed and sent the cheque using recorded delivery to Aviva, so that it could countersign as the commercial trustee of his pension. The cheque was also signed by Henry James, Stuart’s son, who is also a trustee of the pension fund. Aviva then sent this to Transact using Royal Mail recorded delivery.

The cheque bounced because of discrepancies in the signature. A second cheque was issued, but this also bounced because of an alert from Barclays’ fraud detection systems. This concerned Henry James, who went into a Barclays branch to ask for an electronic transfer instead, but he was told this wouldn’t be possible. Barclays told The Sunday Times that it cannot verify this conversation because of the amount of time that has passed.

A third cheque was issued and again posted to Aviva to countersign, which in turn posted it to Transact using recorded delivery on February 1. It was intercepted and paid into a TSB branch in Cheapside, in the City of London, on February 6. The TSB account belonged to a company called Transact Client Limited, which was incorporated on January 11 — only 25 days before the funds were transferred in.

Transact Client Limited is involved in “information technology consultancy activities” and is completely unrelated to the pension firm Transact, which is part of Integrated Financial Arrangements Limited, and is registered with the Financial Conduct Authority, the City regulator.

Barclays cleared the cheque and £1.049 million of James’s money landed in the TSB account on February 7. James was told that Transact had not received his money on February 12. TSB was not aware of the scam until Barclays notified it on March 4, but by that point only £427 was left in the TSB account. TSB was later able to recover £259,591, but the remaining £789,339 is still missing.

A litany of failings

After being told by Transact and Barclays that his money had been transferred to the wrong bank, James lodged formal complaints against Barclays and TSB on March 18 and 19 respectively. Both banks deny responsibility. TSB told James that the account in question belonged to Transact Client Limited.

The police told James that his case is part of an investigation called Operation Peel. He was told that two people were arrested when flying back into the UK from an unknown location. They were interviewed and released on bail. Both suspects live in the UK.

James said: “Why did Barclays allow so much money to be sent via a cheque despite the warnings by Transact? Why was it paid into an account with a different name? Why was so much money allowed into an account of a business that was less than a month old and is clearly not the genuine Transact, a well-known pension firm?”

He said that his financial security had been placed in jeopardy, “which has had a devastating impact on me and my family”. He accused TSB and Barclays of a litany of failings. “ Nobody seems to want to take responsibility. My pension was set up to ensure that my family had sufficient funds for a happy retirement, maybe having some money available for my grandchildren’s private education and some inheritance for my children.

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“If I don’t get it back I don’t know what I can do. I was looking forward to retirement, but I may now have to work longer.”

James has hired solicitors to help recover his funds, and is racking up legal bills. This, on top of the interest he is missing out on, adds up to about £30,000, he estimates. He wants this, and his missing pension money to be refunded to him by the companies who he says did not protect his money.

He has complained about Barclays and TSB to the Financial Ombudsman Service. The ombudsman has dismissed the TSB claim because James is not a customer of the bank. It also can’t investigate Aviva because James’s type of pension is not under its remit. He could lodge a claim against Aviva with the separate Pensions Ombudsman, if he is unsatisfied with the response from the pension firm. The Financial Ombudsman is still investigating his complaint against Barclays.

James also made a complaint to Transact, which also denies responsibility. It told him: “We encourage the use of electronic payments and deposits and we did not direct the trustees of your pension scheme to remit funds by postal cheque. Following receipt of the first cheque from Aviva we asked that they contact the bank and issue a new cheque.

Transact told James that when the second cheque was rejected, it had told Aviva and Furnley House [James’s adviser] that a bank transfer would avoid any further issues. “Notwithstanding this advice a cheque was issued and sent to us,” Transact said.

Cheque fraud is one of the fastest growing scams — although the number of cases is still small it went up 24 per cent last year to 1,197, according to the trade body UK Finance. Total losses were £5.6 million.

What the banks say

Barclays told James it had made no errors. It said that it was down to TSB, as the bank receiving his money, to investigate. It said the name of the intended recipient was Transact Client Account but TSB’s customer account was Transact Client.

It said: “The fact that pension funds were paid into an unknown third party is not Barclays’ responsibility.” It added: “It is not Barclays’ responsibility to check the payee details, as this was a cheque payment and not an electronic transfer, where we can check the name on the account through a confirmation of payee check.”

Barclays told The Sunday Times: “We have every sympathy with our customer, who has fallen victim to a sophisticated scam where their cheque was intercepted and cashed. The cheque we issued was in the correct name and for the correct amount, and we carried out all of our responsibilities as the issuing bank.

“We take the protection of customer funds and data extremely seriously. If a customer thinks they have been a victim of fraud or notices a transaction on their account that they do not recognise, we advise them to contact their bank immediately and report the case to the police through Action Fraud.”

TSB said it was continuing to make efforts to recover the rest of the money. It has no knowledge of the third cheque being intercepted and suggests questions should be directed at Aviva “as it appears payment by this method was at its continued insistence for reasons that are not clear given the substantial value”.

TSB confirmed that the third cheque was presented at a branch where “deposits of this nature are not unusual”. TSB told The Sunday Times: “This is a very complex and distressing case, and given the number of regulated parties involved, we believe that the best and quickest outcome will be achieved by allowing the Financial Ombudsman Service to review all the details and determine how it should be resolved among all the parties.”

TSB said that it had been very hard to ascertain the complete sequence of events and that it did not have full sight of what occurred. It said it has continued to co-operate with James and the police.

Royal Mail said: “We take the security of post very seriously and strongly encourage customers to report concerns to us so we can investigate.”

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Aviva said: “We understand this case is subject to an ongoing police investigation and therefore cannot comment on the details. What we can say at this stage is that we have conducted a thorough internal review and we are confident we followed the right process.

“It is common practice for payments to be made by a number of methods, including cheque, depending on the instructions we receive, and the type of pension involved. Where cheques are issued, we have robust processes in place to ensure the details we use are correct and cheques are sent by recorded delivery.”

The FCA said: “Firms we regulate need to manage the risk of fraud and keep people’s money safe. This seems a very unusual occurrence and cheque fraud is low. We expect the firms in this instance to talk to the victim, and if necessary to one another, to come to an agreed outcome.”

Detective Chief Inspector Lee Parish from City of London Police said: “We are unable to provide further information due to the ongoing nature of the investigation.”

If you believe you may have been affected by this, or have any information that could assist the investigation, report to Action Fraud online at actionfraud.police.uk or by calling 0300 123 2040.”

Transact declined to comment.

Who uses cheques anyway? How to protect yourself

• The number of cheques has fallen dramatically. Some 1.5 billion were used in 2007, but that had fallen to 129 million by 2022, according to UK Finance, an industry body. But even though they are becoming rare, cheques are a big target for scammers.
• There are many different types of cheque fraud. A fraudster may pay you for goods or services using a fake cheque or intercept a genuine cheque, doctor it and deposit it into an account.
• To stop your cheques from being doctored, cross through any blank spaces, for example after the payee name and amount. Never write a cheque with a pencil.
• Follow up on any cheques you have sent to ensure that they gone to the right person, in case they have been intercepted in the post.
• Ensure that any spoiled cheques are properly accounted for and destroyed. Rip them into pieces or burn them — do not put them straight in the bin.
• Always send cheques by post using recorded delivery, particularly if they are of high value. If your pension firm requests a transfer by cheque, ask if a safer electronic payment is possible.
• If you are a business, always wait until a cheque payment has cleared before releasing goods or services.