Barely a week goes by now without another story in the press about a pension scam, be it the perpetrators being found guilty and struck off (or even better, sent to jail), or a victim winning compensation through the Financial Ombudsman Service and the Financial Services Compensation Scheme.
The common theme with these scams is unregulated investments being sold to unwitting members of the public, often taking their pension funds and investing them through a self-invested personal pension, small self-administered scheme or a qualifying recognised overseas pension scheme.
While the salesmen may be unregulated, as well as the product or investment, there is often a regulated adviser sitting in the background. Indeed, if a final salary pension is involved there almost certainly must be.
Once there is a regulated individual in the chain the client can, and will, complain to the Fos when they realise they have been scammed and the FSCS will pay out. A bill we all ultimately have to bear our share of.
In the main these victims are not greedy; they are mainly financially unsophisticated and easily persuaded to move their pensions by the scammers with the promise of better returns.
In many cases they do not even know their pension will end up invested in unregulated, high risk ‘investments’. They place their trust in the ‘financial adviser’.
The biggest common factor behind these scams, though, is how the first contact with the victim is made.
Invariably it is by a cold call.
Closing the loopholes
Finally, after first promising a ban in the Autumn Statement of November 2016, the government has now produced proposals for a ban with the promise they should be brought forward before the end of 2018 and become law shortly afterwards.
The proposals ban any cold call relating to pensions, even if that call is made for another purpose but makes any mention of pensions during the call.
Scammers will not be able to call victims for a ‘lifestyle survey’ and then move the conversation to pensions as part of that call. Potential loophole closed.
There are key, allowable exceptions to the ban – for example where somebody has given express consent to the call.
This does give some concern that a potential victim could see an advert on social media and unwittingly give ‘consent’ to a cold call from that.
- The government has put forward proposals for a ban on pension cold-calling.
- Where somebody has given express consent to the call, this counts as an exception.
- Marketing calls are allowed where there is an existing relationship with the client.
I am certain the scammers will try to find ways to still contact potential victims and this may well be one of them. If you see dubious adverts on social media, please report them to the Financial Conduct Authority and the provider. I have seen recent evidence of Facebook removing adverts.
Also, marketing calls are allowed where there is an existing relationship with the client.
The relationship can be as the existing adviser or advisory firm, the existing pension provider or scheme administrator.
I think this is an entirely appropriate exception to the legislation. Indeed I would argue that it is not even an exception, because a call where there is an existing relationship is not a ‘cold’ call.