The UK Government is to crack down on scammers who persuade savers to transfer money from existing pension schemes into fake schemes. The ban on cold-calling by pension companies will include texts and emails, the government has announced, as it cracks down on scammers who target savers’ retirement funds.
Cold calling is the most common method used to initiate pension fraud. In 2013, 97% of pension fraud cases brought to Citizens Advice stemmed from cold calling. Almost £5m was lost to fraudsters in the first five months of 2017, said the government, and it was estimated that since April 2014 a total of £43m had been taken. People targeted by scammers lost an average of £15,000 each.
Typically, fraudsters contact savers and offer low-risk investments with high returns, persuading them to transfer their money from their pension schemes into fake schemes. When new flexibility rules allowing people access to their funds were introduced in April 2015, there were warnings that this could prove costly to consumers unable to distinguish between scam calls and marketing from genuine firms.
The cold-calling ban will prevent all cold calls, emails and texts about pensions, and will be enforced by the Information Commissioner’s Office. The ICO has powers to fine companies up to £500,000 if they break its rules, although it can only take action against companies based in the UK. There will be two exemptions to ensure legitimate calls are not affected – companies will still be able to contact consumers who have expressly requested information, and will still be allowed to make marketing calls to existing clients.
Along with the ban, there will also be new rules to make sure that only active pension schemes, with up-to-date accounts, can register with HMRC. While the rules on registration will form part of the finance bill, the cold-calling ban will need separate parliamentary time, so it is unclear when it will come into effect. The pensions minister, Guy Opperman, said: “If people have saved for a private pension, we want to protect them. This is the biggest life’s saving 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.”
Making pension schemes harder to set up and ensuring transfers only proceed to appropriately regulated schemes will certainly help to blunt the damage that scammers can inflict. To add a further safeguard, it is also advisable to ask for at least one reference that you can speak to, preferably who lives in your area. The referee can then give you added reassurance that the company you are dealing with is legitimate.
Finally, a simple check that the company is also regulated to give you advice is an absolute must. There are many firms that target expats in Cyprus who are not authorised to do so – so be aware. The requirements from HMRC are getting tighter and tighter for pension transfers which is welcomed by Blacktower as it ultimately protects the consumer. We have been assisting clients with their pension transfer requirements for many years and have all the safeguards in place to ensure that you receive proper, qualified advice in this very technical area.