Pension cold calling – what are the government doing?
One of the major concerns for the pension industry is the number of fraudsters scamming pension investors by investing their savings into unsuitable or high-risk investments. This can result in investors losing a large amount or in some cases, all of their pension funds. Another popular scam is where individuals disguising themselves as regulated financial advisers with false FCA registration numbers convince investors to transfer their pension into another pension arrangement. They encourage investors to do so on the understanding that they can access their 25% tax free cash early, which is understandably an attractive proposition to some investors.
Recent research has revealed that 12% of people have been targeted by fraudsters which equates to 6.4 million individuals in the UK finding themselves a victim of a pension scam. The research suggests that nearly three in four people have been cold-called regarding their pension. These figures are particularly worrying in the case of vulnerable individuals.
Other statistics show that there are as many as eight scam calls made every second in the UK. Almost £19 million was released in suspected ‘pension liberation’ between April 2015 and March 2016 which is double the amount than in the same period the previous year.
To combat cold calls, the UK government plans to introduce a ban on pension cold-calling. This ban will mean that clients will never be cold-called about their pension and that any communication they receive will be from companies that they have an existing relationship with. In enforcing this ban, the government believes that it will help cut off the scam at the source.
As well as putting a complete ban on firms cold-calling individuals, the government is also giving the Information Commissioner’s Office (ICO) the power to issue fines of up to £500,000 to any company breaking the rules.
However it now appears that this legislation is not going to be included in the Financial Guidance and Claims Bill meaning a further delay to the ban. If not included in this Bill then a Finance Bill 2018 may be proposed, which may not receive royal assent until 2019.
With the increasing amount of pension savings being lost due to scams, the proposed legislation is a much-needed intervention from the government. We believe that investors should receive honest, regulated service and advice from the very beginning of their pension planning. We only work with regulated advisors and the strong relationship between us, our clients and their advisors is at the forefront of our business. Discussing the proposed new regulation is a great way of the government bringing the problem to the public’s attention. However, we believe that a probable delay until 2019 is unacceptable. Making cold-calling a hot topic is a big step, but legislation needs to become a government priority so that investors are not left out in the cold.