Commenting on the proposals, Barnett Waddingham senior consultant, Malcolm McLean, said: “It is good news that the Government is at long last proposing to take a more robust approach to counteract the threat pension scams pose to the credibility and integrity of the pensions system as a whole.
“All the evidence suggests scams have multiplied in number since the introduction of pension freedoms and many vulnerable pensioners have been swindled out of their life savings. This is totally unacceptable and has to be stopped.
“The proposals recognise a ban on cold calling is needed to stop fraudsters contacting individuals direct but are rather less definitive on measures for dealing with other types of electronic communications including e-mails and text messages. I think we have to be clear that closing one door here will not prevent the fraudsters employing other means of ensnaring their victims and a more comprehensive solution must be found to block as many outlets as possible.
“Although precise details are somewhat lacking, proposed wider action to limit the statutory right to a transfer to some occupational schemes is especially welcome, as is the plan to make it harder for fraudsters to open small schemes.
“It should be noted that primary legislation will be needed for much of these measures and will therefore take some time to come into law. In the mean time we must continue to remind individuals to remain vigilant and decline to deal with callers who they do not know, and have not themselves initiated the approach in the first place.”
Commenting on the Government’s proposed ban on pension cold-calls, Kate Smith, head of pensions at Aegon, commented: “A heightened awareness among consumers that people should not be contacting them out of the blue about their pension is the most valuable aspect of the ban on cold callers. But while Government proposals are welcome, to be fully effective they need to include banning texts and emails as well. Scams are constantly evolving and fraudsters go to great lengths to trick people, even coaching them to work around pension company safeguards, so what’s needed is hard line measures to really crack down on future pension scams. New legislation will mean firms can only call consumers if they have an existing client relationship, where the customer envisages receiving calls. This is good news as it’ll allow providers and advisers to continue to offer much needed support.
“Where there is no existing client relationship, pension cold-calling will be banned. The legislation should avoid unnecessary barriers which stop legitimate advisers helping consumers with their pensions. With too few people seeking advice in the UK, a common way of filling the advice gap is for third parties to refer consumers to financial advisers where they have specifically opted to speak to a financial adviser. This practice should be allowed to continue, as long as the marketing literature is clear and the consumer understands what they have signed up for.”
Ben Fairhead, pensions expert at law firm Pinsent Masons, comments: “The proposal to introduce a requirement of a genuine employment link to a receiving occupational pension scheme would make it much more difficult for scammers to exert pressure on pensions trustees to transfer funds into suspicious schemes. The devil will be in the detail of working out what a “genuine employment link” and “regular earnings” look like – but any change in this area is likely to be an improvement on the current legal position. Recognising and tackling the issue of dormant companies that are all too often used as vehicles for pension scams is similarly encouraging.
“There will no doubt be a lot of debate generated about the proposed changes and some contrasting views. However, there will have to be some compromise as leaving the law as it currently stands is making it too easy for pension scammers.
“The one fly in the ointment might be the window of opportunity that remains now for scammers before any change to the law is brought into effect – which could be many months away. It would be sensible for the government to think about some interim measures to prevent the sort of upsurge of activity that might otherwise result whilst the law remains in its current unsatisfactory state.”
The Government consultation paper can be found here
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