PENSIONS INSIGHT
Samantha Mann MAAT, MCIPPDip, CIPP senior policy and research officer, outlines the government’s proposals Tackling pension scams
The scale of the problem Almost £5 million has been obtained by pension scammers during the first five months of 2017; and if you add to that the further estimate that a total of £43 million has been unlawfully obtained by scammers since April 2014 (resulting in an average loss of nearly £15,000 per victim), it is clear the government needs to act. Pension scammers get savers to part with their money with false promises of low-risk, high-return investment opportunities. If it seems too good to be true, it probably is. Consultation In December 2016, the government launched a consultation (http://bit. ly/2gHGh8g) seeking views on a package of measures aimed at tackling three different areas of pensions scams: ● banning cold-calling in relation to pensions ● limiting the statutory right to transfer ● making it harder to open fraudulent schemes. The government received 111 responses to the consultation. A number suggested that the government could and should go further by taking a significantly tougher approach; however, the majority of respondents were supportive of the proposals. The government’s consultation response (http://bit.ly/2gbgxQQ) sets out the feedback the government received and its intended next steps. It provides details as to how the government intends to respond to this crime in the coming years in a bid to protect pension savings from theft through scams. Defining a pension scam There was widespread agreement as to the usefulness of having a definition of a ‘pension scam’ as recommended by
Project Bloom which is a cross-government taskforce led by The Pensions Regulator (TPR). It comprises representatives from government, regulators and law enforcement agencies and has been set up to monitor trends, share intelligence on emerging threats and help co-ordinate action to tackle pension scams. ...help trustees, providers and members to spot warning signs before making a costly mistake Having a clear definition will help trustees, providers and members to spot warning signs before making a costly mistake. It will also support regulators and the legal system to classify activity as a scam after the fact. With a tweak that replaces ‘under 55’ with ‘normal minimum pension age’, the definition of a pension scam is: “The marketing of products and arrangements and successful or unsuccessful attempts by a party (the ‘scammer’) to: ● release funds from an HMRC [HM Revenue & Customs] registered pension scheme, often resulting in a tax charge that is not anticipated by the member ● persuade individuals over the normal minimum pension age to flexibly access their pension savings in order to invest in inappropriate investments ● persuade individuals to transfer their pension savings in order to invest in inappropriate investments where the scammer has misled the individual about the nature of, or risks attached to,
the purported investment(s), or their appropriateness for that individual investor.” Ban on cold-calling Cold-calling is the most common method used to initiate pension fraud, and so it is proposed that by delivering such a ban a clear message can be sent to consumers that no legitimate frim would ever look to cold-call them about their pensions and so will encourage scheme members to end the call immediately. The types of calls that would be covered by the ban were listed in the consultation and included: ● offers of a ‘free pension review’, or other free financial advice or guidance ● assessments of the performance of the individual’s current pension funds ● inducements to hold certain investments within a pensions tax wrapper including overseas investments ● promotions of retirement income products such as drawdown and annuity products ● inducements to release pension funds early ● inducements to release funds from a pension and transfer them into a bank account ● inducements to transfer a pension fund ● introductions to a firm dealing in pensions investments ● offers to assess charges on the pension. The final details of the ban are being worked on and legislation to deliver the ban will be brought forward when ‘parliamentary time allows’. Two specific exclusions from the ban will be introduced: calls where consumers have expressly requested information from the firm; and those where an existing client relationship exists.
| Professional in Payroll, Pensions and Reward | December 2017/January 2018 | Issue 36 26
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