MPs demand default pension guidance in urgent scam action

MPs demand default pension guidance in urgent scam action

The work and pensions select committee wants consumers to seek guidance by default before they can access their pension pots as part of its fight against pension scams.

The group, chaired by Frank Field, has called on the government to make people either take or expressly opt out of guidance before they can access pension freedoms that give them unfettered access to their entire retirement savings.

In their first report on pension freedoms published on 11 December the MPs also called for an outright ban on pension cold-calling, as previously proposed by IFA Darren Cooke in a grassroots campaign he led with the support of other advisers.

The committee wants both measures included in the government’s guidance bill, which is due its second reading in the Commons in January, to be implemented in the summer of 2018.

The details of the default guidance should be worked out by the Financial Conduct Authority (FCA) following public consultation, while further details for the cold-calling ban should also be worked out by the regulators, not government, to speed up the process.

Mr Field said: "Every day that passes without a ban, people are being avoidably conned out of their life savings. There is no need to overcomplicate this: our proposal would see an enforceable ban in place by summer, closing at least one door on rafts of scammers at a stroke."

He said the strongest weapon against pension scams was good advice and guidance but the problem was people were not taking it. 

“Making guidance the default option combined with the ban on cold calling would be a simple but big step forward in consumer protection in the era of pension freedoms,” he said.

The government initially said it was working on legislation to make sure the cold calling ban will be in place before 2020.

The current Financial Guidance and Claims Bill already contains an amendment introduced at Lords Report stage, which calls for the government to implement a ban based on recommendations from the new single financial guidance body.

But this process would cause considerable delays because the guidance body would not launch until later in the year, the committee said.

The committee had held a series of hearings on the matter including with government, the regulators, and providers of the government’s free at-retirement guidance service Pension Wise, as well as charities.

They were told by the FCA it was concerned about the growth in pension scams and the speed and sophistication with which they were evolving.

They were also told by the The Pensions Regulator (TPR) estimates of the scale of scamming were likely “grossly underestimated” by official reports and the full scale may not be apparent for up to 20 years.

TPR has been put in charge of compiling figures on the scale of scamming but has not yet been able to produce data accurate enough for publication.

It referred MPs to comments made by Margaret Snowdon, chair of the Pensions Liberation Industry Group, who said she was “reasonably confident” £1bn had gone to scams.