UK government responds on pension scams
There have been fears that pension freedoms introduced in 2015 have left retirees a sitting target for scammers. Pensions minister Guy Opperman said almost 11 million people are cold-called about their pension every year.
In its response, the government agreed it needed to address the threat posed by pension scams “by cutting off scamming activity at the source, in order to disrupt criminals and protect savers”.
It added that it “also agrees with the committee about the need to ensure more people can benefit from pensions guidance to help them to understand their options and make decisions that are right for them”.
It agreed that current measures for dealing with cold calls are flawed because they are too slow and not necessarily enforceable. It said there needed to be an “alternative, quicker way” to ban pensions cold calling.
However, industry figures believe the moves are inadequate. Tom Selby, senior analyst at AJ Bell, said: “The government continues to talk tough on tackling pension scams but we still have no idea when the proposed ban on cold-calling will come into place. It has now been well over a year since the ban was originally announced and almost three years since the pension freedoms were launched. It is unacceptable policymakers have taken so long to introduce such an important consumer protection measure and implementation should now be fast-tracked.”
James Walsh, policy lead: engagement, EU and regulation at the Pensions and Lifetime Savings Association (PLSA), said: “While the cold calling ban is welcome, it is not a water-tight solution. Some scammers will still work to find a way around legislation by – for example – calling from overseas.”
The government also proposed measures to boost take-up of the Pension Wise guidance service. It plans to engage with providers to test innovative ways to boost take-up – including potentially automatic guidance. Selby welcomed the move, saying it was possible to “ensure engagement and understanding of retirement saving is improved without creating unnecessary unintended consequences”.
“This testing should cover a range of different nudges at different points in the retirement savings journey. The House of Lords auto-guidance amendment, while well intentioned, raised more questions than answers and risked creating a pension transfer pile-up, and the government was right to replace it. But increasing take-up of guidance and advice remains the right goal and it’s important all stakeholders work together on solutions that will achieve this aim.”
Jane Goodland, responsible business director at Old Mutual Wealth, said: “Knowledge is the main issue. Understanding of pensions is declining and numbers from the Office for National Statistics show that disturbingly 58% of the adult population don’t think they have sufficient understanding of pensions to save for their retirement – the highest number since the question was first asked in 2010. This lack of understanding is having an adverse effect on pension contributions with 14% of people saying they aren’t contributing to their pension because they don’t know enough about pensions, a percentage that has been steadily climbing.
“With large parts of the population claiming they don’t have enough knowledge to save, it is crucial we tackle the growing epidemic of financial illiteracy. Research shows one of the reasons people switch off when it comes to finance is because they don’t understand, and this is a growing issue we need to combat.”