Whether or not pensions cold-calling is banned, says Elaine Turtle, it is vital providers and advisers work together to help educate consumers on the dangers of chasing unrealistically high returns.
Today Chancellor Phillip Hammond stands up to deliver the first of his Autumn Statements, setting out the government’s plans for taxation and spending, based on economic projections. All eyes will be on him, not least because he has served in two high-profile cabinet positions and has made some harsh budget cuts in his time.
One area that looks set to be included is a ban on cold calling with regards to pensions. This will mirror the situation in the mortgage market where this practice is banned already – and there will be very few people who think this is anything other than a good idea that will help to protect consumers.
The reason there is a need for such a move is that pension scams are on the increase. Already an issue in recent years, it only became worse as an unintended consequence of the pension freedoms introduced in 2015 by Hammond’s predecessor, George Osborne.
Pension freedoms have enabled consumers to take all of their pension pot, subject to tax charges, in one go if they so wish. This means unscrupulous salespeople are now able to directly target consumers, rather than having to target them via their pension and risk having the SIPP or SSAS provider refuse to allow a potentially fraudulent investment or a transfer of their existing pension.
Over the years, there have been many high-profile investment scams and providers now undertake very high levels of due-diligence to minimise these being invested in now. This can vary from looking at the potential land or property on Google through to undertaking background checks on the board directors, highlighting previous insolvencies and so forth.
In the six months after the introduction of pension freedoms, the amount of money reported stolen in London through scamming, according to the City of London Police, almost doubled – from £5.4m to £10.6m.
Now, we can all see why consumers can be duped – especially if they do not use or have access to an adviser. They are looking for higher returns and may view some of these investment opportunities through rose-tinted glasses and so be sucked in by the salesmen.
It is important, however, for providers and advisers to work together to help educate clients so they understand the risks and are not tempted by the unrealistic prospect of high returns, in such a low-return environment. After all – if it sounds too good to be true, then it probably is.
One way to do this is by highlighting the booklet and information available from The Pensions Regulator. So if you are writing articles for your local paper, talking at consumer events or in any other way dealing with consumers, be they your clients or not, helping to educate can only improve consumer outcomes.
The Pensions Regulator website provides information and tips on how consumers can best protect themselves against scammers. It also highlights high-profile cases, including one that saw hundreds of people lose an estimated £14m to a cold-calling scam that offered cash incentives if savings were transferred out of a pension schemes and into an investment schemes that offered higher returns.
If you would like to download the booklet to use with your clients or contacts, click here
Elaine Turtle is a director of DP Pensions
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