Pensions committee demands cold calling ban by June 2018

The government should introduce a cold calling ban by June 2018, at the latest, by legislating for it in the Financial Guidance and Claims Bill, the Work and Pensions Committee has said.

In a report, published today, the Committee warned the government that action is desperately needed to protect individuals from scammers, and cold calls are the leading driver of pension scams. Therefore, it has said a new clause in the Bill requiring the government to introduce a ban by June 2018 at the latest, but set the details by regulations, will allow outstanding issues to be resolved without being tied to a lengthy parliamentary process.

In addition, it said that legislating this way will mean the ban will be future proof: capable of being adapted as scams evolve.

The Committee accepts that a ban on cold calls will not stop pension scams altogether, but noted that it is an important preventative measure. It also believes that a ban would send a strong message to individuals not to respond to unsolicited contact about their pensions.

Chair of the committee Frank Field said that with every day that passes without a ban, people are being “avoidably conned out of their life savings”. The government has previously said that introducing such a ban has “complexity within it”, but Field has argued there is “no need to overcomplicate this”.

“Our proposal would see an enforceable ban in place by summer, closing at least one door on rafts of scammers at a stroke,” he said.

Furthermore, the Committee has recommended that Clause 5 (2) of the Bill should be strengthened to create a ‘guidance by default’ provision that ensures an individual either receives or expressly refuses guidance before being granted access to a pension pot.

It said the details should be set out in Financial Conduct Authority rules, following public consultation. The government should use its existing powers to place equivalent requirements on trust-based defined contribution pension schemes. The Committee thinks that guidance by default would promote shopping around, better-informed decisions and protection against scams.

“Low saver engagement and high financial value makes pensions rich pickings for scammers offering fantastical returns or seemingly clever advice. The strongest weapon in the armoury against this is good advice and guidance - people just aren’t taking it. Making guidance the default option combined with the ban on cold calling would be a simple but big step forward in consumer protection in the era of pension freedoms. The government should use the Bill that has just arrived in the commons to legislate to protect pensions now.”

Pension scams are nothing new, but the risks have become more pronounced since the introduction of the pension freedom reforms. The Committee said that a combination of high financial value and low saver engagement has made pensions a scammer’s “perfect storm”. Archetypal inappropriate investments are high risk, highly illiquid (once money is invested it is very difficult to retrieve) and unregulated – the Committee heard of examples like schemes to invest in “diamonds, overseas property developments, store pods, forestry and film”.

Estimates of the scale of scamming vary hugely but the Committee thinks it is likely “grossly underestimated” by official reports and the full scale may not be apparent for many years.

On Wednesday the Committee will hear evidence on the British Steel Pension Scheme, which the Field has described as a “honeypot for scammers”.

    Share Story:

Recent Stories


DB risks
Laura Blows discusses DB risks with Aon UK head of retirement policy, Matthew Arends, and Aon UK head of investment, Maria Johannessen, in Pensions Age's latest video interview

Sustainable equity investing in emerging markets
In these highlights of the latest Pensions Age video interview, Laura Blows speaks to Premier Miton Investors fund managers, Fiona Manning and Will Scholes, about sustainable investing in equities within emerging markets

High-yield Investing
Laura Blows discusses short duration global high-yield strategies with Royal London Asset Management head of global credit, Azhar Hussain, in the latest Pensions Age podcast
Sustainable Investing
Laura Blows speaks to Royal London Asset Management sustainable fund manager, George Crowdy, about global sustainable equity investing