One of the things that has most annoyed me about the financial services world over the years has been the unstinting efforts of crooks to cheat consumers out of their hard-earned savings by any means possible – and it looks like it is happening all over again.
While the financial advice and financial provider sectors have been cleaned up beyond all recognition over the past two decades, there remain a staggering number of crooks, con artists and scammers who will stop at nothing to get hold of savers’ money.
This time round, the threat comes most perniciously from the pensions area. Almost as soon as the chancellor George Osborne sat down after his March Budget, which paved the way for new ways of funding retirement and removed the obligation for people to purchase an annuity, a small plague of financial locusts began investigating ways of feeding on the pension sector.
It was praiseworthy that the FCA spotted this unwholesome trend straight away and recently issued a warning to consumers about the fact that so-called ‘pension liberators’ were already beginning to claim that they were offering post-Budget pension guidance by providing so-called ‘free pension reviews’.
The offers of a free pension review can come out of the blueThe FCA is keen to point out that many of the companies offering these suspect services are not authorised by it and, furthermore, that there is evidence that some of these reviews end in consumers having their pensions moved into unregulated investments. Surprise, surprise.
Apparently, the offers of a free pension review can come out of the blue in the form of an unexpected phone call, email, text message or an online advert, according to the FCA.
The offers of a free pension review can come out of the blueThe FCA’s director of enforcement and financial crime, Tracey McDermott, explained: “Most of the companies that are making these offers are not authorised by us, although they often falsely claim they are acting on our behalf.
“Some also claim that they are acting on behalf of the government in relation to the recently announced commitment to introduce a service to provide free guidance for people at the point of retirement. However, this initiative has yet to be launched by the government and, therefore, any claims to be linked to it are highly unlikely to be true.”
The FCA said that these so-called free “reviews” are specifically designed to persuade consumers to move money that has been saved in an existing personal or occupational pension to a Sipp or Ssas. The pension pot is then typically invested in unregulated and often illiquid investments, such as overseas property developments, forestry or storage units known as store pods, or whatever.
In essence, it appears these companies are more or less trying to rob pensioners of a pension pot that they may have spent a lifetime accumulating by shoving them into risky investments that will probably turn sour.
I suspect that this is just the beginning, and that we will see a rise in misdealings in this area, as more unscrupulous companies target the potentially rich pickings to be had. Ironically, the Budget is likely to make this potential scandal worse rather than better.
I have great sympathy for the vast majority of highly qualified, professional financial advisers who must weep when they hear stories like this. All the good work of the RDR and the financial adviser community over the past few years will be undone by damning headlines about how a vulnerable pensioner was cheated out of their life savings by an adviser who shifted their entire pension into an overseas building project which was never completed.
Of course, most of us these days have received endless emails, phone calls and text messages urging us to make a PPI claim or “unlock” our pension. However, because many consumers are not savvy enough to differentiate between one of these companies and a professional firm of advisers, the whole financial sector is sullied by these financial gold diggers.
Consumers often wrongly assume that these companies are regulated, when in reality most are not. I suspect many naive consumers, perhaps not unreasonably, assume that if someone rings them up out of the blue about their pension, they are a regulated financial adviser. It is understandable.
The regulator is just beginning to wake up to the threat, but the media and bona fide advisers need to do more to alert consumers to the dangers.
Government should also do more to tackle this growing problem, which may well require new consumer protection legislation to clamp down on these mercenary firms.
One important area that needs attention is exactly where these calls are coming from. They are not, as many think, being made directly by the pension liberators themselves. Instead, they are frequently from so-called lead generation companies, which then pass on details of ‘suckers’, sorry, ‘prospects’, to the companies seeking the business.
Lead generation firms can charge as much as £500, £1,000 or more for a good lead, I am told. Of course, there is nothing wrong with bona fide lead generation firms that abide by appropriate codes of conduct and consumer legislation, but this is one ‘grey’ area of the financial services market that needs serious scrutiny… and soon.
Kevin O’Donnell is a financial writer and journalist
