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Labour plans mandatory ‘cooling-off period’ amid pension fraud concerns

Labour wants to force DC providers to offer savers a “cooling-off period” when they access their pension pot in order to better protect against fraud.

Labour says the rules would come into action when customers approach, or are approached by, a provider on how to invest their savings.

The party says the requirement would only apply when a person attempts to withdraw more than a certain amount from their pot, although this has not been specified. The duration of the pause also remains unclear.

Cooling-off periods are already offered by some providers, although their duration varies between 14 and 30 days.

In addition, Labour has also laid out plans to work with the FCA on introducing a kite-marking scheme for both registered and authorised firms, with the aim of helping customers select reliable products.

Labour shadow work and pensions secretary Rachel Reeves says: “We fully support the new pension flexibilities which will help savers make the most of their retirement income from next week. It’s important that savers are protected from the very real threat of being ripped off by fraudsters or forced to pay excessive fees.”

She adds: “These are common sense measures that will help savers make the most of the new pension flexibilities and maximise their retirement income.”

The proposals come after Reeves proposed a cross government taskforce to tackle scams, featuring the FCA, The Pensions Regulator, HMRC, the Serious Fraud Office, and Action Fraud.

The party has also promised to introduce a cap on drawdown charges.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. There are two parts to the problem, the products and the decision to draw down the fund. Buying a kite-marked product does not necessarily mean that it was the right thing to do, but at least that is a start, along with the statutory waiting period.

  2. This seems a bit mixed up – most people taking cash are going to be putting it straight into their bank account (no product to kitemark) and are going to be spending the cash. So how would cooling off work where the cash has been spent?

    Is what is proposed a waiting period – where providers are accused of annoying the customer by not paying out for a period of time? – so it’s more of a 30 day notice account than a straightforward bank account?

  3. @cloak I think this is more geared towards people who are approached or are enticed by unregulated investment schemes salespeople, to help them back out or take guidance before purchasing “too good to be true unregulated” investments. But as you rightly say it will also slow down the process for those people who have perfectly good reasons for accessing their cash to pay off credit cards/debts etc.

  4. Once again, policy on the hoof. What good would it do to introduce a cooling off period if the scamming company is not known to be one by the client. The scammers will just wait, as they are already used to under the current transfer arrangements. Indeed, whilst a pension provider may refuse to transfer under current rules if they suspect a scam, they may well be obliged to send funds to the scammers after the cooling off period.
    It’s as if they know they dare not oppose the scheme as it is popular with the electorate, but are liiking to areas to criticize it and sound concerned.

  5. Pension freedoms followed by strangulation by regulation. If you ever wanted proof that the current form of regulation does not work, this must surely be it.

    The regulator is powerless to stop the unregulated scams, fraudsters and poor guidance. The simple solution would be to make everyone have regulated advice, but they just cannot bring themselves to do this. Just like regulating products they do not want the responsibility.

    I find this game of political foot ball both sicking and immoral as they don’t actually know what they are talking about or committing to, it just sound good.

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