The pensions cold calling ban has been a long time coming, but does it go far enough in protecting people from scams?
If something is worth having, it is worth waiting for, so the saying goes. The ban on pensions cold calling is finally set to take effect from June, having reached the statute books this month as part of the Financial Guidance and Claims Act.
The ban first appeared on the government’s to-do list back in November 2016, amid mounting concerns over the rise in scams since the introduction of pension freedoms. However, the ruling was constantly put on the backburner in the interim.
And with the final details still to be fleshed out, there are already fears that the legislation could fall short.
Work and pensions select committee chair Frank Field has voiced his concerns that there will be potential loopholes for unregulated introducers who contact people face-to-face.
He highlighted how the committee’s inquiry into the British Steel debacle came across instances where pension scheme members were approached in person by introducers working on behalf of advice firms – a practice dubbed “factory gating”.
This begs the questions: how useful will the legislation be, and what supporting measures are needed to make it a success?
A step in the right direction
Last year, pensions minister Guy Opperman outlined how the ban and additional measures to limit transfers and tighten scheme registration rules would reduce the number of requests to transfer to illegitimate schemes, which would build trust in reputable firms.
However, shadow pensions minister Jack Dromey says there are two further measures Labour will press the government to implement.
“We want them to clarify their meaning of ‘unsolicited direct marketing’ to ensure it includes the ‘factory gating’ we saw in Port Talbot. And we also want them to extend the ban to claims management companies to ensure consumers don’t continue to suffer from the scourge of cold calling any longer.”
Dromey adds: “The Financial Guidance and Claims Act is a very important piece of legislation which aims to avoid any worker ever suffering the pain and heartache those at British Steel suffered from when they were scammed out of thousands of pounds by vultures looking to make a quick buck.
“In the process of the Bill, I highlighted the story of a shift supervisor at Port Talbot who broke into tears because it was not only him who had been duped into a dodgy transfer, but the rest of his team who had followed his lead. It is for people like the Port Talbot shift supervisor that this Bill was passed.”
Research by the Money Advice Service suggests there could be as many as eight scam calls every second, with Citizens Advice calculating that 10.9 million consumers have received unsolicited contact about their pension since 2015.
While the ban is certainly a step in the right direction, many believe it is unlikely to wipe out all fraud. Dentons director of technical services Martin Tilley says: “It’s taken such a long time to get here that the scammers have found there are other ways. They’ve opened another door before we’ve had time to close this one.
“There will always be unregulated introducers who will find ways of getting in front of people. The ban may raise consumer awareness but I’m disappointed that it hasn’t been made part of the government’s national strategy.”
Former pensions minister Ros Altmann welcomes the legislation as all the scams she has seen have started with unsolicited approaches.
However, she believes the wording of the Act does not really do much to strengthen consumer protection.
“It enshrines in primary legislation the guidance that is already part of the FCA Conduct of Business rules, but it leaves the option of ‘consent’ on the table, so that people may be considered to have asked for a cold call,” she says.
Even if those who do the cold-calling can be traced, there is often little that can be done to enforce punishment.
“Fines are often unpaid as the firm puts itself into administration, or penalties on overseas companies cannot be enforced,” she says.
Lead generation firms have been calling thousands of people offering “pension reviews” and then selling those details on to fraudsters.
AJ Bell senior analyst Tom Selby says: “By making this illegal, the government will place a serious spanner in the works of scammers’ business models.
“However, it is important policymakers and the industry do not view this as the end of the road. Fraudsters have become increasingly sophisticated and so stopping cold-calling will only put a dent in the problem.
“Some will inevitably move call centres abroad in an attempt to circumvent the ban, so it’s important UK authorities work with their counterparts overseas and do what they can to limit this where possible.”
Although the legislation is not watertight, Sense Network chief executive Steve Young says one of the key benefits is that it will help emphasise the message that no one should take advice or buy a financial product from anyone who cold calls them.
Indeed, much of the success of the ban will ultimately depend on how it is communicated to the general public.
For Red Circle Financial Planning director Darren Cooke, who started the petition calling for the pensions cold calling ban back in 2016, the most important thing advisers and providers can do is get the message out there.
“The public need to know that a cold call asking about pensions is illegal, that the person making that call is a criminal and that they want to steal their pension. So hang up.”
Selectapension director Peter Bradshaw adds that when in contact with people who are interested in a potential transfer, providers and advisers should always question whether they received a call out of the blue.
“They could also add text to their communications reminding clients that cold calling is banned, and to watch out for any illegal approaches,” he says.
As LV= head of policy Philip Brown points out, enforcement action will be critical because scammers are unlikely to pay attention to the law.
Selby says the Information Commissioner’s Office needs to start as it means to go on.
“It’s crucial the Information Commissioner shows its teeth and issues fines early on to prove it is a force to be reckoned with,” he says.
Darren Cooke, director, Red Circle Financial Planning
We are yet to get the final version of how the legislation will be applied to pension cold calls but we can guess that the scammers are already using other methods to reach the public – through social media, for example. In the past that has been less successful for them than cold calling, but no doubt they will increase their efforts in this area once the ban is in place.
It also seems likely scammers will move their call centres offshore so it will be hard to prosecute – unless the controlling company is UK based.
The legislation may not just make it illegal to make the call, but also to receive that information and act on it. So even if the call is from abroad, a UK-based person can’t use it to follow up and scam the victim. GDPR may also help us in that regard, but if you are going to be a criminal and scam people out of their money, why would you worry about GDPR?
Scott Gallacher, director, Rowley Turton
There are lots of arguments to say the scams will carry on, and they will to some extent. But the key point is that the ban makes it easier to say something is a scam – if someone is cold calling it must be a scam.
A lot of questionable pension unlocking requires the involvement of an adviser to sign off the transfer, so dodgy advisers can still sign off transfers that would go terribly wrong. But if cold calls are illegal, advisers can’t do transfers that originate from them.
The ban won’t protect everyone but it should protect a lot more people.