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Government powerless to stop pension scam cold calls

Pension fraud is on the rise but the government is unable to ban cold callers targeting retirees.

Government powerless to stop pension scam cold calls

Savings are under threat from an increasing number of pension scams but even the pension minister has said she is powerless to stop fraudsters cold calling older people.

City of London Police data last year revealed that pension scam losses had more than trebled in the month after pension freedom was introduced in April.

Losses from pension fraud surged 235% to £4.5 million in May 2015, up from £1.4 million in April of the same year as savers were able to access their pension cash.

Pre-pension freedom this fraud was called ‘pension liberation’ as fraudsters would offer people access to their entire pension fund, often pre-age 55, but the saver would either see little of the money or be hit with a large tax bill – the unluckiest experienced both.

However, since ‘pension liberation’ has effectively been legalised for those aged 55 and over and there is no need to buy an annuity, scammers have changed tack. Instead of encouraging savers to get hold of their cash early and avoid buying an annuity they are encouraging them to take their money out using the freedoms and invest it in questionable investments with the promise of larger returns.

Pension minister Ros Altmann said the government had taken steps to warn individuals about scammers but was unable to ban companies targeting older, vulnerable people.

‘We are very exercised by scams of all kinds,’ she said. ‘They have been there for years, it used to be called pension liberation and it happens time and again.

‘We have been promoting the measure that we have taken to try and help people avoid scams and if someone cold calls you about your pension then just hang up.

‘A common scam is someone phoning up offering a pension review… we would like to ban cold calling for pensions but we are unable to do that.’

The rules around cold-calling are set out by in the Privacy and Electronic Communications regulation. While companies are not allowed to call people who are registered with the Telephone Preference Service or who have previously opted out of contact, they are not prevented from contacting people out of the blue if they are not on opt-out lists.

Companies offering investments, pension reviews, and other financial services are governed by these rules but it is not illegal for them to cold call. As a rule of thumb, legitimate financial services companies will not cold call people.  

Lack of protection

The introduction of pension freedom means pensioners no longer have the protection from scams that was offered by their pension scheme. Before the freedom, a pension scheme member requesting their entire pension pot in cash could be prevented from taking it if the pension provider believed they were being targeted by pension liberators.

Now, anyone requesting their pension as cash can do so under pension freedom.

Michelle Cracknell, chief executive of The Pensions Advisory Service, which runs the government-backed Pension Wise guidance service, said pension fraud could now happen once a retiree had legitimately taken their money out of their pension.

‘Since pension freedom the ability to have a "legal pension scam" is greater,’ she said.  

‘[Pension providers] cannot stop paying out a pension pot after age 55 and [the retiree investing in a] car park or hotel in Cape Verde. These [investment] companies are unregulated, overseas and there is no consumer protection.’

Cracknell said the pension industry was having to work ‘harder and harder’ to keep people safe but admitted that the size of the problem was unknown.

‘People [who can access their pensions] are vulnerable – we will never be able to stop the scammers,’ she said.

The government will have to make people more aware of scams in future, particularly if stock market volatility means retirees aren’t receiving as much on their investments returns as they’d like.

Andy Manson, an adviser at KPMG, said: ‘There is the potential for scams to get worse. An extended period of low returns means pension pots will not give the income [retirees] want and they will be attracted by these scams.’

Manson believes the lack of data around pension scams means it is difficult to know how widespread the problem is and keep it contained.

‘We need to educate consumers better so they are better able to identify scams,’ he said. ‘There will be a need for the government to look at consumer protection and if appropriate… tackle scams.’

8 comments so far. Why not have your say?

Robert Gill

Apr 26, 2016 at 10:43

The Government may be powerless to stop cold calls, but the Financial Conduct Authority are not.

There is no problem with cold-calling around mortgages, which you would imagine would be ripe for miss-selling by the same scammers, as the FCA rulebook specifically oulaws it under

Clearly there is a problem with cold-calling around pensions, as the FCA rulebook specifically allows it under a quite vague

Why can't the FCA just put a similar prohibition on pensions as is in place for mortgages?

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Andy W

Apr 26, 2016 at 11:07

Is it really that easy ?

I moved jobs last year and wasn't eligible to join the full-fat company pension scheme until I'd completed 6 months service, but the company was forced by law to auto-enrol me in a stakeholder scheme

I could have opted-out of it, but thought I'd let it run for the 6 months and then opt-out and join the main scheme, transfer it to my SIPP

- I'd be turning-down a 2% employer contribution for 6 months, I'd be stupid not to

I'm in the middle of trying to do that - no problem at all with my SIPP provider, they're more than happy to take the xfer, but the stakeholder scheme is proving rather difficult to get the money out of

All admin has gone via my SIPP provider, they've not dealt with me directly for that. - they've sent to to my SIPP provider who sen it to me, I sent it back to the SIPP provider who sent it back to them

They have wanted 2 lots of forms filled-in by me, plus others from my SIPP provider to prove that they are a legit pension scheme (they're actually a big recognised name in the UK).

They've wanted the original of my birth certificate or passport.

They've sent me directly three lots of correspondence to say that the SIPP provider is doing the transfer, including a standard pack of warning bumf about how to recognise pension scams, warning signs like 'were you cold called ? have you been offered returns > 6% ? have you been told you can access your pension before 55 ? etc'

And it's so far taken 3 months, with no sign yet of when the money will transfer over

For about £520 !

So quite how do these pension fraudsters suggesting you transfer all your huge pension pot to some untraceable company in Grand Cayman actually work ?

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Robert Gill

Apr 26, 2016 at 11:42

The government may be powerless to stop pension scam cold-calls, but the FCA are not.

The FCA handbook states there is a prohibition on mortgage cold-calls and we have no problem with cold-call scams regarding mortgages.

Why can't this be extended to pensions?

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Law Man

Apr 26, 2016 at 18:05

Why is it not possible to make unsolicited canvassing of investment products a criminal offence?

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Robert Gill

Apr 26, 2016 at 18:49

Law Man: it is possible to outlaw the canvassing of investments and pensions. The FCA have prohibited cold calls in relation to mortgages, however, they still allow it for pensions, investments and protection. A simple handbook change would do the trick.

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cat in the crypt

Apr 28, 2016 at 08:01

They've been selling magic beans for millenia, and there have always been idiots to buy them. We can't protect all the greedy fools who fall for promises of 'gold for coppers' from their own stupidity. As ever, caveat emptor.

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Robert Gill

May 10, 2016 at 10:11

cat in the crypt; the problem with cold calling in Financial Services is that a lot of the cold callers are directing people into unregulated investments that the FCA takes no responsibility for.

Caveat emptor does not apply to regulated advice. It's all caveat venditor business under regulation.

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Stephen Sefton

Oct 21, 2017 at 08:32

There is existing legislation (FSMA 2000 s.238 plus statutory instruments in 2005) making it illegal to invite unsophisticated investors to participate in unregulated collectives (now called NMPI's). The legislation is in place but not being enforced. Cold calling is not the issue, it's where the pension ends up that's the issue.There are people with legitimate reasons for transferring a pension but can still fall prey to the lying confidence tricksters, who are expert at fraudulent promotion and conning the vulnerable. Legislation exists but the authorities have to have the will to enforce it, which they don't. The scammers will find ways around cold calling bans and still move pensions into NMPI's for their own enrichment - illegally - until such time as they are prosecuted. There's a particularly unpleasant, fat "bar-steward", who fleeced me and I am persistently trying to persuade the authorities to prosecute him along with his two friends operating from a major North of Engand city. I'll get there in the end!

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