MPs call for ban on pension scams

MPs call for ban on pension scams

The UK parliamentary Work and Pensions Committee has called on the government to ban pension scams, including cold calling.

The committee’s report on pension scams also recommended that people should be made to either take or opt out of guidance before they can access their pension pot.

Savings are under threat from pension scams are nothing new, but the risks have become more pronounced since the widely welcomed 2015 pension freedoms reforms, according to the Work and Pensions Committee.

The combination of high financial value and low saver engagement has made pensions a scammer’s ‘perfect storm’. Archetypal inappropriate investments are high risk, highly illiquid and unregulated.

During its investigation, the committee heard of pension scams such as schemes to invest in “diamonds, overseas property developments, store pods, forestry and film”.

The Work and Pensions Committee wants the government to use the Financial Guidance and Claims Bill to introduce a ban on cold calls, through a new clause requiring one to be implemented by June 2018 but the details set out in regulations so that outstanding issues can be resolved without being tied to a lengthy parliamentary process.

Clause 5(2) of the bill should also be strengthened to create a ‘guidance by default’ provision that ensures an individual either receives or expressly refuses guidance before being granted access to a pension pot.

According to the committee, the details should be set out in Financial Conduct Authority rules, following public consultation. The government should also use its existing powers to place equivalent requirements on trust-based defined contribution pension schemes.

Work and Pensions Committee chair Frank Field MP said: “Every day that passes without a ban, people are being avoidably conned out of their life savings. There is no need to over complicate this: our proposal would see an enforceable ban in place by summer, closing at least one door on rafts of scammers at a stroke.”

“Low saver engagement and high financial value makes pensions rich pickings for scammers offering fantastical returns or seemingly clever advice. The strongest weapon in the armoury against this is good advice and guidance—people just aren’t taking it.”

“Making guidance the default option combined with the ban on cold calling would be a simple but big step forward in consumer protection in the era of pension freedoms. The government should use the bill that has just arrived in the Commons to legislate to protect pensions now.”

James Walsh, policy lead for engagement, the EU and regulation at the Pensions and Lifetime Savings Association, commented: “We agree with the committee that urgent action is needed on pension scams. People are losing their life savings to scammers every day and there are steps we could be taking now to protect them.”

“Government should extend its authorisation regime to all schemes receiving transfers, not just master trusts as at present. This would ensure people could transfer their pension savings secure in the knowledge that they were dealing only with legitimate providers. An authorisation regime would help to drive scammers out of the market.”

Categories: News, UK Pensions

About Author