Don't delay pension cold calling ban
The Government is being urged to crack on with a pension cold-calling ban and blocks on suspicious pot transfers to help combat devastating scams.
Plans for potential new legislation were disrupted by the election, and went unmentioned in the Queen's Speech setting out the Government's new programme, sparking concern that key initiatives to thwart fraud are being delayed.
'We were relying on a new Pension Bill to address issues highlighted by the pension industry to give savers greater protection,' said Kate Smith, head of pensions at finance firm Aegon.
'Unfortunately, the Queen’s Speech was disturbingly quiet on any legislation to ban pension cold-calling or give schemes and providers greater powers to block suspicious transfers.
'Pension scams won’t just go away without some serious action. Limiting the right to a statutory transfer could potentially safeguard millions of pounds from scammers. The Government must keep this on its agenda, speak up and take the issue seriously.'
Chancellor Philip Hammond launched a consultation over a ban on pension cold calling last year, following a petition that won widespread industry and public support, including backing from two former Pensions Ministers.
The Treasury is also looking at giving pension firms greater powers to block suspicious pot transfers when they fear customers have been targeted by fraudsters, and making it harder for scammers to abuse smaller pension schemes.
Alistair McQueen, head of savings and retirement at Aviva, said: 'Legal protections for pension savers have to be made a priority.
'Since the introduction of pension freedoms, savers have much greater choice of how to fund their retirement. But having access to large sums of money is very attractive to scammers.
'People need to be on their guard and be aware of the different tactics used by scammers. But they need support too and we are in favour of legislation to ban cold calling and more powers for pension providers to block transfers to suspicious schemes.'
Gillian Guy, chief executive of Citizens Advice, said: 'Plans to introduce a ban on pensions cold calling were paused by the last government but mustn’t fall off the agenda.
'The ban would make it easy for people to know they should not trust anyone who calls them out of the blue about their pension and help protect their savings.'
Guy said pension scams can leave people’s retirement finances in tatters, and that while pension freedoms have given people more choice over what they do with their retirement savings, many were being bombarded by cold callers.
The Government was asked to comment on the future timetable for these measures. A spokesperson said: 'We are committed to tackling pension scams and helping savers to protect their money. A response to the consultation will be published in due course.'
Why are pension firms concerned about pot transfers?
Pension providers are unable to halt or delay pot transfers for very long when they fear customers are being scammed or moving their money to unsuitably high risk schemes, following a key High Court ruling in early 2016.
Firms normally have to complete pension transfers within six months. However, if they have concerns and can't verify the receiving scheme’s status, that period can be extended until further checks are completed.
Despite making efforts to alert customers moving to dubious schemes, companies have to tread carefully and can sometimes find it hard to convey their misgivings and dissuade those who are insistent about moving their cash.
Under these circumstances, they will report their suspicions to Action Fraud and the Financial Conduct Authority, but ultimately have to allow transfers to go ahead.
Pension freedoms launched in 2015 mean over-55s now have full access to their savings. People aged under 55 are also legally allowed to withdraw retirement cash - although they are subject to a hefty 55 per cent tax penalty if they do so, which applies even if they lose all or part of their savings to a so-called 'pension liberation' fraud.
The Pensions Advisory Service is currently piloting a 'pre-scam' prevention initiative, so that firms can refer customers to its independent and free helpline, effectively using it as a last line of defence to help customers at risk of losing their retirement savings.
TPAS is also testing a new 'post-scam' service, to come to the assistance of people who have already fallen victim to pension scams.
The Government-backed organisation provides free help to the public on pension issues, and its website can be found here.
How widespread is pension fraud?
The Mail has reported that almost 11 million pensioners are targeted by unscrupulous cold callers every year, and estimated losses amounted to almost £19million in the year to March 2016.
Pension freedom reforms have allowed over-55s to access their entire retirement savings pots, making this money an obvious target for unscrupulous sharks.
Fraud experts say that a combination of new rules, investors looking for returns and pensioners withdrawing large sums of cash have created a potentially fertile hunting ground for conmen.
'Not only are they master manipulators, scammers are constantly evolving ways to trick victims,' says Kate Smith of Aegon.
'Scammers are becoming increasingly sophisticated in the ways they target people's money, including pension savings. Being aware of what to look out for can not only protect your money but save you a lot of stress as well.
'While initially tempting, companies promising high returns from unusual unregulated investments, or offering early access to pension savings, more often than not, turn out to be scams.'
She added: 'It’s not only individuals who need to guard against the threat of scammers though, we stand a much stronger chance of beating them by being collectively vigilant. No controls are infallible, so pension providers and schemes, along with advisers, need to be alert and update controls as scams evolve.
'Thwarting scammers at every opportunity is key and strengthening regulation can certainly dent scammers’ success rates. The promise of high returns by persuading individuals to move pensions overseas, when the individual has no intention of living abroad, was previously one of the scammers’ favourite tactics.
'Today, it has almost disappeared off the radar, thanks to government regulation. The introduction of an immediate 25 per cent tax charge proved a simple and effective way to clamp down on this type of fraudulent activity, resulting in an almost immediate decline in this type of scam.'
Smith highlighted the pension fraud issue to mark the start of Scams Awareness Month, which is led by Citizens Advice and Trading Standards and encourages people to report and talk about scams.
How do you protect your savings from fraudsters?
The Government, police and financial regulators have created the Project Bloom task force to combat pension fraud. Its tips to avoid scams are here.
City regulator the Financial Conduct Authority, which is part of Project Bloom, also runs a ScamSmart campaign. It urges people to check its warning list of companies running scams or operating without authorisation.
Pension firm Aegon has issued the following advice on how to avoid scammers.
- Try not to engage in conversation with cold callers. The safest thing to do is to hang up.
- Think about installing call blocker technology on your phone.
- Never give out personal information, including your bank details.
- Always check the Financial Conduct Authority online register if you doubt a company.
- Check the FCA ScamSmart warning list for known investment scams.
- Use the Pension Advisory Service's online tool to identify a pension scam if you are worried about information given or action you’ve taken.
- Never feel pressurised into making a quick decision, and read any documents carefully before you sign on the dotted line.
- Always do the research. As always, if in doubt, use a regulated adviser. You can find one of these using the ‘unbiased adviser’ website.
- Report any concerns to your pension provider, adviser, or Action Fraud by calling 0300 123 2040 or online at actionfraud.police.uk.
Phrases pension fraudsters use that should alarm bells ringing
- The offer won't last long
- You're entitled to a free government review
- You'll make a better return by investing in storage units/forests/overseas property
- There's a guaranteed 7 per cent return
- We'll send a courier over with your documents
- Can you sign quickly - I'm parked on a double yellow line
- There's a legal loophole
- You're a sophisticated investor
- It's free
- Your pension company might try to talk you out of it - they just want to keep your money
Where to go for help
Action Fraud: If you suspect a fraud, report it to the UK’s national fraud and internet crime reporting centre, Action Fraud on 0300 1232040.
The Pensions Advisory Service: Offers free and impartial guidance on pensions and will tell you how to spot a scammer.
Pension Wise: Over-55s who want to take advantage of new pension freedoms can make a face-to-face or phone appointment with the Government's free guidance service on 0800 802 1345, or call 44 20 3733 3495 if you live outside the UK.
Pension Tracing Service: Some scammers will offer to help you find lost pensions but the Government will offer free help. Take care if you do an online search for the Pension Tracing Service as many companies using similar names will pop up in the results. These will also offer to look for your pension, but try to charge or flog you other services, and could be fraudulent.
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