‘Not foolproof’ but a good start – Industry on govt cold-calling ban

The financial services industry has reacted positively to the prospect of the government banning the cold-calling of pension savers, describing the idea as’a good start’.

Chancellor Philip Hammond is expected to announce plans to crack down on cold-callers while giving providers more powers to block suspicious pension transfers in his first Autumn Statement on 23 November.

Under current proposals, seen by the BBC, calls where a business has no existing relationship with someone will be forbidden, including those targeting people who inadvertently “opt in” to receiving third-party communications. Fines of up to £500,000 are expected to be introduced.

Additionally, rules around small self-administered schemes (SASSs) are expected to be tightened – with a view, for example, to preventing the use of a dormant company as the sponsoring employer.

Cutting off the source

Hargreaves Lansdown head of pension research Tom McPhail said: “One of the characteristics of these fraudsters is they will keep looking for weak points in the system. What’s good about the cold-calling ban is that it will cut off their source of new customers, and the capacity to find new victims will hopefully be constrained by this change.”

One example, he said, was the problem of legitimate pension providers having to send transfers to pension schemes they believed to be fraudulent but not having any choice in the matter.

Earlier this year, in the case Hughes v Royal London, the High Court ruled the provider did not have the power to block a pension transfer – even though it felt the transaction was fraudulent and blocking it would have been favourable to the customer.

AJ Bell senior analyst Tom Selby said: “Since this case, there has been a need for policymakers to redress the balance so providers have the power to protect scheme members.”

He argued the proposed measures showed the government was taking the issues seriously, adding: “SASSs are a legitimate retirement planning vehicle that have been abused by scammers.

“We have seen large numbers of savers attempting to join suspicious SASSs who have no connection to the employer linked to the scheme. Tackling such abuses would protect savers and help clean up the SASS market.”

Royal London director of policy Steve Webb agreed the crackdown was a positive move. “With a lot of scams, they start with a phone call – someone ringing up, making a deal and, before you know it, someone is taken in, transferring their funds,” he said. “The goal must be – if they get a call out of the blue, people know it’s illegal.”

Beyond phonecalls

The government has said it would gather views on extending the proposed ban to all electronic communications and Aegon head of pensions Kate Smith agreed the changes needed to go further to cover texts, emails and other common techniques used to try to part people from their savings.

Citizens Advice chief executive Gillian Guy highlighted that as many as 10.9 million people received unsolicited calls, emails and texts about their pensions over the last year. “The power to fine scammers means enforcement bodies will be able to put a stop to any scammers who still target people’s savings,” she said.

Pension Fraud in Numbers

* According to the government, nearly 11 million pensioners are being targeted annually by cold callers.

* Ministers estimate there are approximately 250 million scam calls per year – equivalent to eight a second.

* Savers are thought to have lost almost £19m to pension scams between April 2015 and March 2016.

* There has been a surge in scam calls resulting from the pension freedoms, according to the regulator. Fraudsters are using the pension freedoms to trick savers by cold-calling them with offers of ‘once in a lifetime’ investment opportunities.

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