Government and regulators must act to stop the trade in hundreds of thousands of individuals’ pension data, say experts.
Last week, staff at some the country’s largest providers were approached by a firm trying to sell the personal information of over 170,000 people with personal pensions and supposedly interested in transferring out of schemes.
The Information Commissioner’s Office is investigating how the firm advertises and trades data, Money Marketing can reveal.
Experts says a “first line of defence” is needed to stop unscrupulous firms buying and selling pensions details.
At the same time there are growing calls for the Government to regulate currently non-regulated firms that may be attracting cash taken from pension pots following the introduction of the new freedoms.
Pension data for sale
Dozens of pension professionals have been approached online by Data Pond, a firm that says it specialises in “bespoke one-off marketing data files”.
Among its products, which include databases on remortgaging, payday loans and PPI claims, are two files purporting to offer hundreds of thousands of pension customers’ personal data.
The first offers the full names, addresses and telephone numbers of 170,000 individuals “with a personal pension in place and looking to transfer” for telemarketing use only.
The purchase price is £585, the data will arrive “a few minutes” after purchase and the file will be sold a maximum of three times “to avoid saturation and to limit competition for our clients”, Data Pond says.
A second product marked for email marketing, telemarketing and direct mail use offers data on 28,000 individuals “looking to transfer” for £575.
Both products claim to provide “fully cleansed, verified and up-to-date” data, “surveyed internally to gain limited permission for third party contact”.
An ICO spokesman says: “We are looking into the way this company is advertising and trading data. Anyone with any concerns should report them to us.”
Data Pond could not be reached for a response.
Fidelity World Investment retirement director Alan Higham was contacted by Data Pond. He says: “I treated it the same way I would if a bloke offered me an iPhone for a tenner in a pub. I wouldn’t give him any impression that I thought he was a thief, and it would be wrong to assume that, but I’d smile politely and say ‘no thank you’.
“These firms could just be scamming naïve pension advisers or pension companies who think £500 for a spreadsheet is great. They might not actually have any data, but if they do the Information Commissioner should step in.”
Providers say the information being touted should cost nearer to £100,000.
Standard Life head of pensions strategy Jamie Jenkins says: “It is concerning that customer data can be obtained so easily and so cheaply for people to cold call them, especially with the danger of scams being so prevalent at the moment.
“It also seems arbitrary that with so many data protection rules in place, customer data can be sold – what sort of checks are being made on the purchaser as to the legitimacy of how they use it? It feels like in the current climate tighter controls would be appropriate.”
JLT Employee Benefits director and Pensions Administration Standards Association chair Margaret Snowdon recently led a cross industry team in producing a code for trustees on tackling pension scams.
She says: “They are springing up all over the place and all selling the same thing. They’re doing everything to get people to buy, with prices ranging from £20,000 to £60,000 – it’s outrageous really.
“Some of the sites are not selling anything at all, they’re just getting the money, but one or two are selling data they’ve managed to get as telemarketers. That’s where the problem is and it’s where I’d like to see some change – making it much more difficult to trade in people’s data.”
Snowdon says stricter rules around buying and selling data would be “the first line of defence” and “avoid the need for tighter controls at the pensions end”.
Regulate the unregulated
Experts also warn the pension freedoms have created a regulatory blackspot as savers pull money out of pensions and explore unregulated investments.
While the number of people taking their whole pot as cash has slowed, this week Scottish Widows says requests for full encashment still represent around 50 per cent of customer intentions.
It says the average pot size of pot being cashed in full was less than £20,000, while 85 per cent of requests were for pots less than £30,000.
Aviva head of pensions policy John Lawson says: “Scammers will target the over-55s, it’s much easier to do and there’s no-one there to police it. We could try and find out what people are going to spend their pot on but they have absolutely no compulsion to tell us and we have no right to push them to find out.
“It’s one of the downsides of freedom and choice. You give savers freedom, but also responsibility to look after their own money. In two or three years’ time this will all come out. As we’re seeing with the pension liberation scams from a few years ago, these cases are now ending up in court and people are looking for someone to blame.”
Snowdon estimates £1bn has left pension schemes and gone into scams over the last few years and says “a hell of a lot more” could be lost if even a small proportion of those hitting 55 access their savings.
Lawson says the Government needs to take steps to keep better track of unregulated schemes that fall outside the FCA’s remit.
He says: “We need to see some sort of regulation of what are currently unregulated schemes.
“You might say before an investment is sold to the public it has to go on some sort of register, whether it’s based abroad or not. Then you could see how many people were investing in those schemes each month and the Government could then regulate them on a risk basis. They could even go directly to individuals and warn them of the risks.”
AJ Bell technical resources manager Gareth James adds there needs to be greater monitoring of how unregulated investments are marketed.
He says: “There are cases where the underling investment is reasonable for a limited number of people but there’s a question mark when it’s being promoted to a much wider range of people who it’s perhaps not suitable for.”
The Information Commissioner’s Office is charged with upholding information rights in the public interest and reports directly to Parliament, Christopher Graham has been Information Commissioner since 2009.
An ICO spokesman says: “Pension companies are covered by the same rules as any other organisation with regards to direct marketing. Direct marketing is covered by the Privacy and Electronic Communication Regulations (PECR) and also the Data Protection Act (DPA).
“PECR states that you need consent before sending electronic marketing: texts, emails or faxes, or to make calls to a number registered with the Telephone Preference Service.
“The first principle of the DPA states personal information must be processed fairly and lawfully. In practice this means organisations must be clear and transparent with people on how they are going to use this data. So they would usually need consent to pass customer details onto to another organisation.
“The DPA covers both selling and buying marketing lists. Organisations must act fairly and lawfully when selling a marketing list. If an organisation has obtained details from individuals with the intention of selling them on it must have made it clear that their details have been passed on to third parties for marketing purposes and obtained their consent for this. Organisations buying lists must undertake due diligence and satisfy themselves that the data was obtained fairly and lawfully and with the consent of the individuals.”
Ray Black, managing director, Money Minder Financial Services
On pension freedoms day our local newspaper carried three or four adverts from unregulated companies offering pension reviews, not one of them was authorised – that’s quite scary. As soon as there’s an advert that has mentioned of a regulated product it should come under the FCA’s advertising and promotions rules.
Pension scams have not gone away – far from it. By 2014, an estimated £500m of pension funds were lost to pension liberation fraudsters. The number is likely to be double before the end of the year and could reach £3bn by the end of 2018, as people realise the transfers they made are bogus. However, there is a new game in town which threatens to dwarf pension scams.
£200bn is expected to be withdrawn from DC schemes as the over 55s take advantage of the new pension freedoms. This money will leave the safety of pension funds and come under the control of the retiring members, who could become targets of scammers.
Scammers have already upped their game with cold calls and emails offering free “guidance” and attractive investment schemes. They know that pension scheme trustees and providers ask awkward questions about suspicious transfer requests, whereas individuals do not and can be more easily lured in.
Unfortunately, scammers can contact thousands of members and have enough background information to be convincing. This is because our personal data is as readily available to scammers as it is to bona fide marketing organisations. All of us tick or untick (confusing isn’t it?) those boxes allowing our data to be shared with carefully selected organisations. There are even scams about selling personal data.
What can be done to stop it?
It is impossible to stop scams; we can only make it tougher for scammers to operate. We all need to:
* raise members’ awareness of the fact that their pension savings are at risk, especially where they opt to take cash;
* alert members to scammers’ tactics so they can spot them, for example, cold calling, pressuring, promising guaranteed high returns;
* remind people that if an offer looks too good to be true, it probably is; and
* apply pressure to government to make it harder for companies to buy and sell personal information.
We’ve introduced strong measures to help reduce scamming on transfers, so let’s now focus on cash scams.
Margaret Snowdon OBE is a director at JLT Employee Benefits and chair of the Pensions Administration Standards Association