HOW PREVALENT IS FRAUD IN PENSION SCHEMES?

14%

81%

5%

SURVEY 2012PENSIONS FRAUD RISK SURVEY 2012HEADLINE RESULTS

Accuracy of member data is considered the most vulnerable area of fraud

According to the National Fraud Authority, fraud costs the UK in general an estimated 73billion every year. The Baker Tilly Pensions Fraud Risk Survey 2012 reveals the incidence of fraud in UK pension schemes and shows how trustees and pension managers have responded to the risk.

Our survey shows fraud has risen sharply over the past year. In 2011s survey, 12% of respondents reported having suffered from fraud over the previous 24 months. This year, 19% have reported fraud over the same timeframe a 55% increase.

WHAT PRACTICAL STEPS CAN BE TAKEN TO MITIGATE THE RISKS OF FRAUD?

CONTACT US

Trustees have a statutory responsibility to demonstrate how they have complied with their duties of preventing and detecting fraud.

16%of trustee respondents failed to recognise they are responsible for the detection and prevention of fraud.

Only

7.5%of schemes have introduced a formal fraud response policy.

35%of schemes have not tested internal controls for more than a year.

19%

12%

+55%

2011

2012

0

5

10

15

20

2521%

15%

+40%

0

5

10

15

20

25

2011

201219% of survey respondents report having suffered from fraud during the last 24 months a 55% rise on last year.

21% of respondents say they have not actively considered fraud risks over the past 12 months up from 15% last year.

Almost

1/5of schemes reported some fraudulent activity within the last two years

To your knowledge, has your scheme suffered from any form of fraud?

Just over

20%of trustee boards have given no consideration to the threat over the past 12 months

No Yes, in the last 12 months Yes, in the last 24 months

To your knowledge, has your scheme suffered from any form of fraud (based on scheme size)?

No Yes, in the last 12 months Yes, in the last 24 months

96%

4%

0-1,000 members

88%

5%7%

1,000-10,000 members

30%

62%

8%

10,000 members

INTRODUCTION

Include fraud risk and related internal controls in your risk register and regularly test the internal controls - extend the statement in your Annual Report covering key risks and internal controls to also consider fraud risk

1

Define your fraud risk policy and allocate responsibility clearly to ensure that everyone (including third party service providers) knows their obligations and how to take action

2

Consider fraud risk more regularly than at present ideally at least twice a year in the current economic climate 3

Educate employees so that they too know how to recognise fraud, how to report it and why it is unacceptable5

Collate information on fraud cases and ensure the warning signs are widely recognised e.g. lack of segregation of duties, constant breakdowns in internal controls, individuals who work long hours, may have financial problems, or their lifestyle does not appear to be commensurate with salary

4

Phone: 020 3201 8000Email: www.bakertilly.co.uk

Marcus McCafferyPartner, Forensic Servicesmarcus.mccaffery@bakertilly.co.uk

Ian BellHead of Pensionsian.bell@bakertilly.co.uk