From January 9, it is illegal to make unwanted or unsolicited calls to people regarding their pensions, and offenders may face fines of up to half a million pounds.
The government has taken action on the issue in response to the harm caused by pension fraud – according to the FCA, pension scammers stole on average £91,000 per victim last year. Research conducted by the Money Advice Service indicates there were as many as eight calls per second last year – the equivalent of 250 million calls.
According to Louise Baxter, Team Manager of the National Trading Standards Scams Team, “Pension scams can be life-altering for people – at retirement they can find that they were the victim of a pensions scam many years ago, and hadn’t realised.
“What we often see is that once you’ve become the victim of one sort of scam, you become a repeat victim because you get added to what’s called the ‘suckers list’. Then your details will be trafficked and you will be targeted repeatedly.
“Because pensions are so complex and people don’t really understand them, it immediately puts you in a vulnerable situation and more susceptible to being scammed or defrauded.”
But there are concerns that although it is a step in the right direction, the legislation does not go far enough. Steve Playle, Trading Standards Manager at the City of London Corporation, comments: “Pensions is a good starting point but there are lots of other people being ripped off by other investment products that aren’t regulated. We’d like to see the government focus more on those and introduce a ban on cold calling across the whole investment sector, not just pensions.”
City of London Trading Standards is part of the Operation Broadway initiative, a multi-agency drive to crack down on investment fraud. “We work with police, HMRC and the FCA to talk about investment fraud, and try to take action against fraudsters and disrupt their activities,” says Playle.
“When we first heard about the Treasury consultation on cold calling a couple of years ago, we thought it sounded like a good idea. But our concern was, why just stick at pensions when you could deal with any type of investment cold calling – whether that’s wine, diamonds, burial plots, or any other kind of investment product?
“People who are trying to make cold calls about pensions are treated as rogues, but if they cold call you offering to sell other investments, the implication might be that they’re going to be OK – and of course that isn’t the case.
“The concern we’ve got is that it legitimises people cold-calling selling non-pension products, which is crazy. The rules don’t apply to overseas operators, so what will happen is that most of the people involved in pensions cold calling will place themselves abroad.”
Lead generation loophole?
Playle adds that there are question marks around potential loopholes in the new legislation. “The other problem we have is how lead generators are going to be dealt with – there’s a whole murky lead generation sector in the UK, where someone will ring you up to find out whether you are interested in various products, and then pass your details on to a company that will sell those products to you. It’s not clear whether or not that lead generation sector is caught by this ban or not. We’re making enquiries to find out what the actual rules are.
“There are lots of lead generators out there – if they can just get round the rules by saying that the consumer was cold called as part of a lead generation discussion, then what’s the point?”
Baxter has similar concerns. “We welcome the new legislation, but whether or not it will stop any criminals, I don’t know,” she says. “In some ways it’s similar to the GDPR legislation – the companies that are legitimate will comply, but the criminals won’t care.
“There needs to be more consumer education – it’s good having new legislation coming in, but there needs to be an aggressive consumer education campaign that informs consumers that it’s illegal for people to call them about their pensions, and not to deal with them. This should come from central government – if they’re bringing in new legislation, they also need to tell consumers about that change in legislation.”
The ban forbids cold-calling about pensions, except in cases where the caller is authorised by the FCA or is the trustee or manager of a pension scheme whom the recipient of the call consents to be contacted by.
According to John Glen, Economic Secretary to the Treasury, “Pension scammers are the lowest of the low. They rob savers of their hard-earned retirement and devastate lives. We know that cold-calling is the pension scammers’ main tactic, which is why we’ve made them illegal.
“If you receive an unwanted call from an unknown caller about your pension, get as much information you can and report it to the Information Commissioner’s Office. I’d also urge all savers to seek independent advice if you’re thinking about making an important financial decision.”
Guy Opperman, Minister for Pensions and Financial Inclusion, comments: “Pension scams are despicable crimes, fleecing people of the retirement they’ve earned by doing the right thing, working hard and saving for the future. Banning pensions cold-calling will protect people from these callous crooks and ensure fraudsters feel the full force of the law.”