Putting money into an occupational pension scheme has many benefits, including tax privileges. The government encourages people to do it so that they can look after themselves financially in retirement. The funds built up this way are a tempting target for fraudsters, who are aided, rather than hindered, by tech giants who run false advertising from such operations.
We report today that Guy Opperman, the pensions minister, has had a series of fruitless meetings with Google executives to urge them to do more to remove these advertisements. Mr Opperman accuses the company of assisting “callous crooks” to prey on the vulnerable. He is right. Google and other tech companies have an obligation to vet their advertisers. If they do not, then the government must legislate to make them liable.
The minister’s criticisms are easily substantiated. Entering an innocuous phrase such as “pension access” into Google’s search engine will bring up many paid-for advertisements making promises that any expert in personal finance knows cannot be true. This material typically offers a free pension review with promises of unfeasibly high guaranteed returns by transferring a pension pot into some exotic overseas venture in property, commodities, currencies or (seriously) storage pods. The description of the eventual destination for the funds is left conveniently vague.
The chances are very high that these purported investment opportunities do not exist and that anyone responding to such material will never see their money again. Nor is the loss of all their savings the end of it. They will have to pay a tax charge on money withdrawn beyond an initial 25 per cent tax-free lump sum. And they are still liable for tax even if their money has been stolen.
The problem of pension scams is highlighted in a report by the Commons work and pensions select committee. The MPs estimate that since the reforms to the pension system in 2015, some £10 billion in investments has been stolen by scammers. The reforms, popularly known as pension freedoms, have justification. They were designed to ensure that rather than being forced to buy an annuity with pension savings, retirees would have freedom to keep their cash invested, or draw it down in whole or in part when they wished. Anyone aged 55 or over is able to access their money at a time of their choice.
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The principle of pension freedoms, especially when annuity rates are at historical lows, is sound. But with freedom comes the need for protection. Google runs advertising that is calculated to appeal to older savers who have accumulated substantial pension pots and want their money to work harder. Yet the promises are false. Many fraudsters even claim that they can legally gain early access to a saver’s pension pot before the age of 55. With a very few exceptions, such as a sufferer from terminal illness, this is a lie.
The forthcoming online safety bill does not cover financial frauds like these. Mr Opperman observed that Google had the algorithms to catch false advertising and flag a warning alongside it. Yet the company does not do it. It gains revenues from the fraudsters whose material it publishes, and then again from the Financial Conduct Authority, whose advertising warns consumers against those scammers. This is a shocking abdication of responsibility by the tech giants. They need to crack down fast, or be forced to.
