The government has launched a consultation looking into how to tackle pension scams, following the announcement in the Autumn Statement that it would ban pensions cold calling.

The consultation document said that although the government’s Project Bloom has been acting to raise awareness of pension scams, in particular through The Pension Regulator’s Scorpion campaign, as well as the Financial Conduct Authority’s ‘Scam smart’ campaigns, more “direct intervention” needs to be taken.

It quoted research by the Money Advice Service which suggests there could be as many as eight scam calls every second, the equivalent of 250 million calls per year. In addition, there were 30,000 defined contribution scheme transfers in 2015/16, representing £1bn of assets. Industry estimates suggest that fraudsters could be behind as many as one in 10 pension transfer requests.

Therefore, the consultation sets out a package of measures aimed at tackling three different areas of pension scams. It will look into a cold calling ban in order to cut off a key source of pension scams whilst also sending a clear message to consumers that they should hang-up if they are called about their pension.

Current legislation gives pension schemes limited scope to refuse a transfer to a scheme which looks like a scam, even if they have legitimate concerns as to the safety of a member’s savings. Therefore, the government is consulting on clarifying the law so that firms can block pension transfers based on clear objective criteria.

And finally, as single-member occupation pension schemes currently require no registration with the regulator, and can be set up using a dormant company as the sponsoring employer they are therefore an easy way for fraudsters to register a pension scheme with HMRC. As a result, the government is consulting on making it a requirement that only active companies can register a pension scheme.

Commenting on the consultation, AJ Bell senior analyst Tom Selby said: "On first read, the interventions announced by the government to tackle pension scams look to have real teeth. By banning cold calling, cracking down on the abuse of small schemes by crooks and handing providers greater power to block suspicious transfers, policymakers have sent a clear message that this looming retirement threat is being taken seriously.

"The government also appears open to taking further action to deter pensions fraud in the long-term. It is right to do so and radical solutions should be in the frame. Savers could, for example, be given early access to their tax-free cash where they can demonstrate financial hardship. People are often lured in by scammers when they are in financial distress, so this safety valve could provide a valuable extra option for those who are struggling to make ends meet.

“A list of permitted investments for Self-invested Personal Pensions (SIPPs) could also be reintroduced. This would make it harder for pensions fraudsters to succeed with scams that are based around ‘too good to be true’ investments that are not on the list.”
The consultation runs until 13 February 2017 and can be viewed here.

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