This blog is in response to the Government’s consultation regarding pension scams, which can be found here: https://www.gov.uk/government/consultations/pension-scams/pensions-scams-consultation
The purpose of this response is to contend that a blanket ban on cold calling regarding pensions is counterproductive towards the Governments desire to ensure that members of the public have pensions, pensions that are suitable for their desired retirement, and unlikely to achieve the goal of reducing pension scams.
Does the definition in 2.1 above capture the key areas of consumer detriment caused by pension scam activity?
Are there any other factors that should be considered as signs of a scam?
We are not aware of any.
In your experience, how are consumers affected by cold calling about pensions? Do any consumers benefit from cold calling about pensions?
It is our experience through marketing on behalf of Financial Advisers for over 20 years, that most of the people we contact are simply not aware of what pension provision they have in place and the performance of any pension they may have.
It can be argued that not being aware of your retirement situation and how well or poorly your pension is growing is as much a problem as the problems aimed to be rectified by the introduction of NEST.
We believe that by bringing together FCA Registered Financial Advisers and members of the public we are contributing to saving people from the crisis pensions have become. Furthermore, by introducing qualified, regulated advisers to the public we can help to reduce the scams that the governments whitepaper aims to address.
Do you agree that the scope of the ban should include the actions set out in paragraph 3.5 above? Are there any other activities that should fall within the scope of the proposed ban on pensions cold calling?
We don’t believe that the ban is the way to solve the problem. If anything, we believe it will make the situation even worse.
Do you agree that existing client relationships and express requests should be excluded from the proposed ban?
Yes, as should any call to individuals that are not registered on TPS/CTPS.
What would the costs and benefits be of extending the proposed ban to include all electronic communications?
It is our understanding that any form of sales/marketing emails to private individuals without their expressed consent is already illegal. There would therefore be no point in introducing further legislation to ban this.
How can the government best maintain the clarity of existing PECR concepts in light of the proposed ban on pensions cold calling?
We do not believe that the proposed ban will rectify the problem. The clarity of existing PECR concepts will be maintained if the government recognizes this and does not introduce the ban.
How else can the government best ensure consumers are aware of the ban?
We do not believe that the ban serves any purpose and therefore see no need to ensure consumers are aware of it. The investment/resource should instead be used to educate the public about scammers and encourage them to meet with regulated Financial Advisers, details of whom can be checked on the readily available FCA register.
Do you have any views on enforcement mechanism set out in paragraphs 3.10 above?
We do not support the ban. The simplest and most effective way would be that the receiving vehicle is legally required to be an HMRC regulated product. The transferring office would need to check that the scheme requesting money is a properly registered pension scheme and it should be illegal for the transferring scheme to transfer without this being the case.
Is there any reason why legitimate firms’ business models should be affected as a result of the ban?
There must be opportunities for Financial Advisers to be able to prospect for new clients. If the ban is implemented as proposed, this will significantly reduce the ability of legitimate firms to prospect, thereby reducing turnover and profits as well as increasing the likelihood that scammers will fill the vacuum thereby created.
Do you have any other views or information the government should consider in relation to the proposed ban on cold calling in relation to pensions?
By limiting the marketing opportunities for Financial Advisers, you are restricting the publics access to quality advice regarding their pensions. Whilst the government has made great strides in trying to make more information regarding pensions available on the internet, it is not a substitute for a traditional financial adviser, particularly because the vast majority of people do not bother to check this information.
Financial Advisers are highly regulated and are required to be highly qualified. It is in Financial Advisers interests as well as the public’s for any loopholes or opportunities for unqualified advice to be closed. These scammers reflect very badly on our profession. Improved regulation on the loopholes exploited by the scammers detailed in the whitepaper is a more considered and targeted approach.
The much larger problem is the significant numbers of the public that have invested is a pension and have not had it reviewed regularly. They are by definition potentially losing a great deal of money by not doing so.
Do you agree with the proposal to limit the statutory right to transfer in this way, or should this be further limited? If so, in what way and why?
We agree completely and support this as to be the only way to absolutely control the problem. If implemented this will save the Government spending on other strategies.
Would a requirement to evidence a regular earnings link act as a major deterrent to prevent fraud? How could the requirements be circumvented?
We agree. This needs to be put in place.
How might an earnings and employment link be implemented? Should the onus be on the scheme member to provide proof of earnings?
The onus should be both on the member and the employer.
What would be the impact and cost to trustees / managers / firms?
The benefits of implementing an earnings and employment link would outweigh the cost.
Under the proposals, how would the process for ‘non-statutory’ transfers change for trustees or managers? What would they need to do differently from the current situation?
We believe a statutory requirement for Trustees to determine that money is being transferred to a legitimate scheme is the only effective way forward. We do not agree it would be right to allow an “insistent client” strategy to be adopted.
What are the pros and cons of introducing a statutory discharge form for insistent clients? How effective would this be as a means of combating scams?
If a statutory discharge form for insistent clients is introduced, we believe the scammers will simply tell their clients that they need to sign this form. We do not believe the introduction of such a form is likely to decrease the number of pension investors who are scammed.
How could it be ensured that a statutory discharge of responsibility did not reduce the requirement on firms and trustees to undertake due diligence?
We do not believe a statutory discharge of responsibility should be implemented.
What are your views on a ‘cooling-off period’ for pension transfers? Do you have any evidence of how this could help to combat pension scams?
A “cooling off” period could be helpful if the government does not implement the legal requirement for firms and scheme trustees to ascertain the legitimacy of the vehicle to which the funds are being transferred. It would, however, be far less effective than such a requirement.
What additional measures or safeguards could be put in place to ensure that trustees or managers appropriately handle transfers that do not meet the new proposed statutory requirements?
We do not believe trustees or managers should be allowed to handle transfers that do not meet the new proposed statutory requirements.
Are there other potential risks that this proposal might present? Do you have any suggestions as to how these risks might be mitigated?
The main risk of this proposal is that it will allow a loophole for scammers to continue to operate. We believe the only way to mitigate this risk is to make it an absolute requirement that firms and trustees establish the legitimacy of the receiving scheme.
Do you agree that new pension scheme registrations should be required to be made through an active company? If no, what are the legitimate circumstances in which a dormant company might want to register a new pension scheme?
We agree new pension scheme registrations should be required to be made through an active company.
Are there any further actions that the government should consider to prevent SSASs being used as vehicles for pension scams?
We believe there should be in depth research before implementing additional regulation on “one man” SSAS schemes. It would be too easy to make a knee-jerk reaction which could result in significantly reducing the ability of legitimate schemes to invest appropriately. One answer, though, could be to have a requirement that all SSAS schemes must have a link with a registered financial adviser who would be able to give the member proper advice on any exotic investments proposed.