Since the arrival of the pension freedoms, concerns have been raised that an increasing number of scammers are targeting pension savers and pensioners, using cold calling techniques such as offering free ‘pension reviews’ to find vulnerable consumers and cheat them out of their pension. Since 2014 at least £43m has been scammed from pensionholders with £5m this year alone so far.
The DWP says its measures will target a variety of different pension scams including phone calls and texts. The move has been welcomed by leading figures and bodies such as former Pensions Minister Baroness Ros Altmann and the FCA.
Minister for Pensions and Financial Inclusion Guy Opperman said: “Today’s figures highlight the extent to which people’s savings are being targeted and stolen through elaborate hoaxes - leaving them with little opportunity to build up their savings again. That is why we are introducing tough new measures for those who scam.
“If people have saved for a private pension, we want to protect them. This is the biggest lifesaving that individuals normally make over many years of hard work. By tackling these scammers, people should know that cold calling, apart from exceptional circumstances, is banned.”
Economic Secretary to the Treasury Stephen Barclay said: “It’s utterly unacceptable that people who have worked all their lives to build up a pension pot should be subject to scams which may leave them out of pocket.
“Pensions are often the most valuable asset a person has upon reaching retirement – and that’s why we are determined to crack down on scammers and protect our hardworking savers.”
FCA chief executive Andrew Bailey said: “Pension scams can have a devastating impact on people’s lives and it’s a positive move by the Government to step in in this manner. We will continue to work with the Government, firms and consumer groups to stop pension scams where we can including through our ScamSmart campaign.”
The FCA relaunched its ScamSmart website this week at https://www.fca.org.uk/scamsmart.
Former Pension Minister and long-term pensions campaigner Baroness Ros Altmann said: “I'm so delighted to see the Government seems to be taking the issue of protecting the public from pension scams more seriously at last.
“Banning cold calling and tightening up on transfers to fraudulent schemes will both help protect the public and there is widespread support for these measures. Having campaigned for so long on this issue, I am really pleased at this news.”
She said it was good news the DWP will act and not just keep consulting. She said it would also send out a “clear message” to the public that anyone who contacts them out of the blue about their pensions is a criminal.
The Government is also set to toughen rules on transfers out of occupational schemes and tighten HMRC requirements that will make it much more difficult to set up fraudulent schemes.
Baroness Altmann said the pension freedoms provided more flexibility but people needed better protection as a result.
Platform and Sipp provider AJ Bell welcomed the Government confirmation of a ban on pensions cold-calling, including emails and text messages although noted there was no date set yet for implementation.
There will be two exemptions from the proposed ban: calls where consumers have expressly requested information from a firm and those where an existing client relationship exists, AJ Bell believes.
Tom Selby, senior analyst at AJ Bell, said: “Pension scammers have already done huge amounts of damage, defrauding hard-working savers of millions of pounds and causing untold emotional harm to thousands of people. Often the victims are elderly and vulnerable, with little chance to recover the money that is lost. Scams also severely damage confidence in pensions and risk putting people off saving for their financial future.
“The measures announced by the Government should put a severe dent in the business models used by these fraudsters, giving savers more confidence their valuable pensions will be safe from criminals. However, it is concerning there remains no set date for implementation and we urge policymakers to fast-track these vital protections through Parliament as a matter of urgency.”
The Government announced its intention to make life more difficult for pension scammers in November last year. However, the response was interrupted by Theresa May’s decision to call a snap general election.
AJ Bell believes the original three key proposals: Banning cold-calling in relation to pensions; Limiting the statutory right of a member to transfer and only allowing Small Self-Administered Schemes (SSASs) to be set up by an active company will now be implemented.
Further details of the changes are expected in the coming days.