The Government says its proposed ban on pensions cold-calls will give “legitimate” advisers a boost.
In a consultation paper today, the Government confirms it intends the ban to cover activities such as “free pension reviews,” offers to release funds early or incentives to put overseas investments in a pension.
However, the Government says it wants to make an exemption for advisers an individual has previously had appointments with. “Express requests” from customers should also not be covered, for example if a prospective client contacts an adviser through a database like Unbiased or VouchedFor and the adviser then calls them.
However, other pensions advisers who have obtained an individual’s details from a public directory would be covered by the ban, as would pension providers offering deals in return for switching to their products.
The Government says these measures will increase trust in the advice profession.
The consultation says: “Advisers have expressed concerns that calls from rogue pension introducers posing as advisers, and offering free pension reviews, damages the sector’s credibility. The Government anticipates that taking a hard line on pensions cold calls will prevent consumers from being deceived by pension scammers posing as advisers, increasing trust in the sector.
“The proposed approach, which allows calls where an existing relationship exists or at the express request of the recipient, is intended to allow legitimate firms to continue to operate without issue.”
Cold-callers will be subject to fines of up to £500,000, and the Government acknowledges there “may be a case” to extend the ban to all kinds of electronic communication in future.
According to the Money Advice Service, there could be as many as 250 million scam calls a year, while Xafinity pensions consulting estimates that as many as one in 10 transfer requests could come from fraudsters.
Blocking transfers and new scheme rules
The consultation is also looking to give pension schemes powers to block transfers if the receiving scheme is not operated by an FCA authorised firm, if the individual does not receive any income from the sponsoring employer of the receiving scheme or if the receiving scheme is not an authorised master trust.
The Government says the “vast majority” or transfer requests would still be allowed, but schemes could now stop transfers into scam schemes.
Finally, the Government is also planning to make it a requirement that only active companies can register a pension scheme to stop fraudsters using dormant companies to set up single-member occupation pension schemes without registering with The Pensions Regulator.
The consultation says: “Because of the size of individual pension pots, and because people do not have to engage with their savings until much later in life, pension savings are an attractive target for fraudsters.
“The Government takes the threat of pension scams very seriously. The Government is committed to protecting people by helping them to avoid putting their money into scams, including through risk warnings, high profile media campaigns, and free and impartial guidance from Pension Wise and The Pensions Advisory Service; and by pursuing fraudsters wherever possible.”