Instances of fraud at UK pension funds more than double
UK - Pension funds in the UK have seen instances of fraud more than double in the past year, according to Baker Tilly, which said schemes with more than 10,000 members appeared most susceptible.
According to the company's annual Pensions Fraud Risk Survey, 19% of respondents reported fraudulent claims over the past year, up 7 percentage points over the previous year, with 70% of fraud reported by larger schemes.
It speculated that this could be due to the volume of membership requests making administration more complex, or larger schemes being more skilled at spotting fraud due to stricter governance.
Baker Tilly added that the amount of fraud detected by schemes managed internally was higher, at 18%, compared with the 12% of fraud detected by external managers and 14% when jointly administered.
It called for mechanisms to be put in place allowing scheme members to hold trustees accountable regarding fraud reporting, as well as for schemes to outline their own policy publicly and in a transparent manner.
"While this need not be enshrined in legislation, it should be widely adopted as best practice," the report said.
It also questioned whether the Pensions Regulator should be taking a "stronger stance" on disclosure of such problems.
It found that there was no single area where fraud was overwhelmingly likely to occur, with investment transactions the source of fraud in 16% of instances, while member-specific de-risking strategies, such as transfer values, were almost as likely to be abused.
Weak IT systems were most often to blame, accounting for 20% of cases.
Ian Bell, head of pensions at Baker Tilly, noted with some concern that 16% of responding trustees failed to recognise it as their duty to protect funds from fraudulent claims.
"Trustee boards need to be vigilant in the monitoring and reporting of fraud as part of their stewardship on behalf of their members, especially as the shift to defined contribution schemes means the bulk of the financial risk lies with members now," he said.