MPs to launch investigation into pension scams
The committee has set out a three-stage inquiry that will investigate how savers are protected as they move from saving for retirement to using their pension savings under freedom rules.
Pension freedoms were introduced in 2015 with the aim of giving people aged over 55 more control over how and when they can access their retirement savings.
The committee’s work will be in three parts. For the first part, it be looking at pension scams and what more can be done to prevent them.
MPs are interested in finding out how common pension scams are, what happens to people who are victims of scams, and what more public bodies could do to tackle scams.
The committee is welcoming submissions from anyone with answers to the questions in a call for evidence. People can submit evidence until 9 September 2020.
Tom Selby, senior analyst at AJ Bell, said: “Handing savers total freedom and choice over how they spend their pension pot from age 55 was always going to make them a prime target for pension scammers.
“While the government was initially slow to grasp the magnitude of this risk, in recent years we have seen a far greater focus with pensions cold-calling banned and a nationwide advertising campaign launched by the FCA.
“It is vital that policymakers and the wider pensions industry continue to monitor scam activity and take action where possible to protect savers.
“But given fraudsters usually, by definition, operate outside of regulatory boundaries, the most effective way to protect people is to arm them with the information they need to avoid falling victim in the first place.”
PIMFA, the trade association for the wealth management and financial advice industry, welcomed the investigation launch. According to its figures, more than £1bn is lost to investment fraud each year and the average loss per person is £20,000.
The trade body has been raising concerns about pension scams for some time, and launched its ScamSafe campaign in April 2020.
Simon Harrington, senior public policy adviser at PIMFA, said: “Pensions scams have become a significant problem in recent years but in the wake of the Covid-19 pandemic PIMFA has become particularly concerned about the increase in scams aimed at people that might be approaching retirement and have seen significant losses in their pension fund in recent months.
“Another target of pension scammers have been those people approaching the age of 55 – though we have also seen evidence of people as young as 35 being encouraged to unlock the cash in their pension at the urgings of unscrupulous individuals.
“All too often consumers are encouraged to take money out of their pensions to invest elsewhere. They are told what they are investing in is low risk, while offering high returns. Moreover, such products are not always marketed to sophisticated or high-net-worth investors. In fact, according to the FCA targets often include retiring police officers, nurses and those that have recently left the Armed Forces, while the average loss victims suffer is now as high as £82,000.”