The new cold calling ban does not go nearly far enough, argues David Brooks, technical director at Broadstone.
On the same day as the Budget, the Treasury finally published its response to the pensions cold-calling ban alongside some regulations.
Broadly speaking, the ban on cold-calling on pensions will do what it says on the tin and create a narrow offence whereby it is against the law to call someone out of the blue (or email or text them).
This is so often the seeding point for a scheme followed by promises of the earth, buy it now “while stocks last” deals and the answer to the victims pensions prayers.
Taking action to stop this occurring is absolutely the right thing to do. The concerns are obvious.
Scammers (and the lead generators that support them) will base their operations in jurisdictions where they can’t be reached or, like Norman Stanley Fletcher, “who accepts arrest as an occupational hazard and presumably accepts imprisonment in the same casual manner”.
As someone who works for a firm that provides third party administration services, I want to see more help.
If you’ll allow me an anecdote: a few years ago, BBC’s Panorama programme covered a scam where people were being given free pensions reviews. Upon completion of these reviews, they were encouraged to transfer out of their Defined Benefit (DB) pension scheme and move to a new pension arrangement.
These were all advised on by Lifestyle Connections and First Review Pension Services and resulted in people investing in resorts on Cape Verde. The next morning, a quick call around with the members of the administration team led to three scheme members being contacted.
All three members had been cold-called, given a sub-par (putting it mildly) review and were now exploring busting open their DB pension for a spurious promise of great returns.
They were all sign-posted to the programme and their transfers were suspended and eventually stopped.
”We have an army of willing, knowledgeable and caring individuals who help the confused as they navigate the labyrinth of pensions”
We could also look at where the good people at Royal London tried to stop Mrs Hughes (and others) from transferring to SSASs that, effectively, failed the sniff test of the administrators. The courts ruled that it is not the Scheme’s job to protect people from themselves and the transfers went ahead.
It is worth observing that, as an industry, we have an army of willing, knowledgeable and caring individuals who work to pay pensions and help the bereaved and confused every single day as they navigate through the labyrinth of pensions.
These administrators are principled individuals who can be the frontline soldiers in a defence against the scammers. What I do not understand is why we haven’t given them more tools to help stop the bad outcomes where people lose their life savings following an attack from a scammer.
What is required is quite clear.
First, we need better publicity within the industry of the bad schemes. The Pensions Regulator and The FCA, together with their combined resources, have discussed “white-lists” and “walled-gardens”. These schemes will already be obvious.
“The fiduciary duty cannot be frittered away at the point when the member most needs it”
We need a “watch list”, a “buyer beware” list. As schemes, providers, administrators, regulators, police, HMRC, etc, become aware of the bad schemes, they should be registered with the regulators.
The list would form an essential part of the pension transfer due diligence process and if a hit is made then the transfer should be delayed, authorities alerted and a potential scam stopped.
The Government has also promised regulations to help trustees and administrators have the power to stop a transfer that is going to a scheme that is not bona fide. The fiduciary duty cannot be frittered away at the point when the member most needs it.
We also know that HMRC became complacent when registering schemes (giving them their stamp of legitimacy) and that needs to change with stronger rules in place to ensure only “fit and proper” schemes are registered.
Without these additional rules, the pensions cold-call ban will only serve to raise awareness of scams and may, at best, inconvenience the scammers. We need to stop the scammers and we need to give the weapons to our Guardians of the Pensions Galaxy – the administrators!
David Brooks is technical director at Broadstone.