By Ben Fairhead, Partner at Pinsent Masons and a member of the Pension Liberation Industry Group
Cold calling ban
Unsurprisingly, the 111 consultation responses reflected "overwhelming" support for a ban on cold calling. It also appears that the government has been persuaded to make this ban reasonably wide in scope, for example extending it to all electronic communications about pensions.
Notwithstanding the clear-cut message presented by this part of the response, the government was vague as to timing of implementation of change. The latest is that there is said to be an "ambition" to act before 2020 and a hint of draft legislation being presented early this year.
Still, it is disappointing that an area of the consultation that was backed by so many and that, on the face of it, ought to be relatively straightforward to implement is taking such a long time to become reality.
The statutory right to transfer
Similarly, whilst the government has shown intent to proceed with restricting the statutory right to transfer to address the issues that arose from the judgment in Hughes -v- Royal London there is no specific timetable for bringing changes into effect beyond an indication that this will not happen until after implementation of the authorisation regime for master trusts.
Moreover, no settled view has been reached as to what level or evidence of earnings would be required for the purposes of establishing a genuine employment link when looking at a transfer to an occupational pension scheme.
Scheme registration process
The one area where the government has acted promptly to bring forward change is in giving HMRC the discretion to deregister or refuse to register an occupational pension scheme without an active employer. This is effectively an "add-on" to the stronger powers HMRC have had since 2014 but perhaps this will provide them with a more straightforward basis to decline registration of a scheme where they have doubts as to legitimacy but no definitive proof of a scam or liberation.
The draft legislation, which is expected to take effect from April this year, would have been sufficient to prevent the registration in recent years of the vast majority of occupational pension schemes I have seen used to facilitate pension scams.
What do the statistics show?
Against the backdrop of the slow progress towards legislative change, there is a mixed message coming through from the statistics on pension fraud.
The figures produced by Action Fraud point towards a reduction in reports of pension liberation fraud, but there is a feeling that the difficulties of making a report to Action Fraud might have contributed to this, plus victims might not always want to report the fraud if embarrassed or concerned about adverse tax consequences.
One of the greatest reasons for change though is likely to be the evolving nature of pension scams. There appears to be less evidence of actual liberation or use of large-scale occupational pension schemes. In addition, it has been clarified that scams arising from monies (legitimately) released from pensions as a result of the Freedom and Choice reforms would be recorded as investment fraud instead of pension fraud. Bearing in mind too that well-executed scams will take longer to uncover, it is difficult to get a meaningful grasp of the figures.
The published statistics cannot therefore be used as an excuse for inaction.
Where does this leave us?
There is enough evidence out there of pension scams in one shape or form to support a clear need for legislative change.
Some of the changes proposed back in 2016 are at risk of starting to look stale given the way pension scams are evolving. Indeed, having asked last year whether we would see the scorpion starved of its prey, there is instead a possibility that the scorpion might simply have planned ahead and adjusted its feeding habits. There is more work to be done in identifying and tackling the latest methods and models used by the scammers.
However, there remains merit in the meantime in pressing on and implementing changes that have had strong collective industry backing through the consultation process and that lack any significant downside.
Equally, the ban on cold calling, whilst still not a silver bullet, could be used to send out a powerful consumer message, not only in relation to conventional pension liberation fraud but also scams arising from legitimately released funds through Freedom and Choice.
Pace of government progress, as well as the developing nature of pension scams, means we will certainly not see them eradicated by the time we reach the sixth anniversary of the launch of the Regulator's campaign. We can only hope though that more will have been done in the next twelve months to get properly on the trail of the scorpion and help steer potential victims away from its sting.
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