Global technology firms such as Google must be held to account for hosting pension scam adverts, MPs have urged.
An “online free-for-all” amid a lack of regulation has allowed scammers to advertise while tech giants “line their pockets”, the Work and Pensions Committee said.
It called for legislation to tackle the issue.
The pension freedoms introduced in 2015 for over-55s have put people at risk of a much wider range of fraud – and the Government and regulators have been left playing catch-up, the committee said.
More than £30 million lost to pension scammers was reported to Action Fraud between 2017 and August 2020 – but the committee said this substantially underestimates the true total.
It said the reputation of Action Fraud, the UK’s national reporting centre for fraud and cybercrime, has been left “in tatters” by a failure to manage the expectations of victims and a lack of action on cases.
The Pension Scams Industry Group estimates a total of £10 billion has been lost by 40,000 people to pension scams since 2015.
The situation is likely to be getting worse, with the coronavirus pandemic providing scammers with new opportunities, it added.
The committee said it had heard throughout its inquiry that pension scammers have moved online, with regulators appearing powerless to hold search engines and social media to account for hosting scam adverts.
It said tech firms such as Google are accepting payment to advertise scams and then further payments from regulators to publish warnings – a practice the committee described as “immoral”.
It called for the Government to rethink its decision to exclude financial harms from the Online Safety Bill and use it to legislate against online investment fraud.
In the same way as traditional media, online publishers should be required to ensure that financial promotions are authorised, the committee said.
The fragmented way in which scams are dealt with makes tackling the problem more difficult, the MPs added.
The report said a pension fraud taskforce should be strengthened.
The existing Project Bloom should be renamed the Pension Scams Centre and given dedicated funding and staffing to manage an intelligence database and law enforcement, it said.
The Financial Conduct Authority (FCA) should also raise its game, the committee said, after hearing it has not been effective in stopping scams, punishing scammers or retrieving scam proceeds.
Pension liberation scams, which encourage savers to access their pension before the age of 55, can leave people with large unexpected tax bills.
The committee said the Treasury should recognise that where a saver has been the victim of a crime and made no financial gain, it may not be in the public interest to demand payment of tax.
Work and Pensions Committee chair Stephen Timms said: “The pension freedoms brought more choice for savers on how to use their pension pots, but the reforms have also opened up a whole new world of opportunity for scammers and fraudsters.
“At the same time, a woeful lack of online regulation has helped them reach more people than ever before. The result is an online free-for-all, where scammers can advertise with impunity while the tech giants line their pockets from the proceeds of their crimes.
“With global firms such as Google being increasingly influential as providers of information, consumers looking for financial advice are being let down by not being afforded the same level of protection they receive from adverts which appear on television or in a newspaper.
“The Government and the regulators have been left playing catch-up following the pension freedom reforms and must now act quickly to protect savers and their hard-earned money.”
According to Google, it has recently updated policies aimed at stopping fraudulent behaviour, has added more layers to its advertiser verification processes, and has also been working closely with the FCA.
A Google spokeswoman said: “Protecting consumers and credible businesses operating in the financial sector is a priority for us.
“We take dishonest business practices and misleading ads very seriously and consider them to be a violation of our policies.
“Last year, we updated our financial services policies and removed 3.1 billion bad ads from our platforms, of which 123 million were ads related to financial services. When ads do not comply with our policies; we take action to remove them.”
The committee also said it welcomes provisions in the Pensions Schemes Act 2021 that will allow people’s right to transfer their pension scheme to be restricted, in cases where there are signs it could be a scam.
Phil Brown, director of policy at workplace pension provider the People’s Pension, said: “Our own research, which we conducted with the Police Foundation last year, found that the scale of these types of fraud has been widely underestimated and we are pleased that the committee has come to the same conclusion.
“We trust that policymakers will listen to the committee’s recommendation to rethink the exclusion of financial harms from the forthcoming Online Safety Bill.”
A Government spokesman said: “We recognise the concerns about online scams and fraud, and we continue to work closely with industry, regulators and law enforcement partners to pursue fraudsters, close down the vulnerabilities they exploit and make sure people have the information they need to spot and report scams.
“The minister for pensions has been very clear that some tech companies are failing pension savers, that they must do more to crack down on scam adverts and should use their existing powers to stop online scammers using their site to promote fake adverts.”