Ban pension cold calling by June 2018, urge MPs
The Work and Pensions Select Committee said the government should act now to ban pension cold calls and make people take – or actively opt out of – guidance before they can access their lifetime savings.
While pension scams have always been on the horizon, the risks have become more prominent since the dawn of pension freedoms in April 2015. Fraudsters have come up with inventive ways to rob people of their pots with the Committee hearing of ‘investment schemes’ in diamonds, overseas property developments, store pods, forestry and film.
Estimates of the scale of scamming vary hugely but it said it is “likely grossly underestimated by official reports” and “the full scale may not be apparent for many years”.
Chair of the Committee, 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 overcomplicate 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. 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 Committee’s seeking a new clause in the Financial Claims and Guidance Bill requiring the government to introduce a ban by June 2018 at the latest.
However, pension experts said there should not be a delay in banning cold calling.
Steve Webb, director of policy at Royal London, said: “With every passing week, more and more people are being scammed, and a scam often starts with a call or email out of the blue. The scammers get more inventive and more creative with every passing week, and the danger is that regulators are always two steps behind.”
Tom McPhail, head of policy at Hargreaves Lansdown, added: “A ban on cold calling and better guidance are both likely to help, however it is important any interventions are carefully thought through. The ban would have to be policed and would have to avoid interfering with legitimate business activity; guidance at retirement is useful for many but it is questionable this can be delivered effectively to all those approaching retirement by public services alone. If it is to be made the default, the government should explore how to harness the resources of the pensions industry to engage and guide its customers.”