After years in the planning and various setbacks, a cold calling ban on pension advice is finally being enforced. It’s a move that aims to protect those saving to secure their financial future. However, more still needs to be done to prevent fraudsters from getting their hands on the hard-earned pensions of clients.
What is the ban?
It’s taken a long time for the ban to come into force after facing several delays, in fact, it was first mooted in 2017. After parliament approved the ban, it came into effect on 9th January 2019. It bans cold calling in relation to pensions, including unsolicited contact via email and text. The ban will be enforced by the Information Commissioner’s Office, which can fine bosses of companies that contact individuals through unsolicited cold calls as much as £500,000.
Pension scams: Devastating pension plans
But why is the ban needed? Thousands of retirees have been affected by scammers using unsolicited contact to pose as a financial adviser or retirement expert offering advice.
It’s easy to see why criminals are attracted to pension savings. They’re often one of the largest funds people are paying into. Persuading just one person to hand over their pension details can mean accessing thousands of pounds. On top of this, many people rarely check their pension, so the fraudulent activity can go undetected for some time, and pensions can seem confusing, making offers of support attractive.
While there are other ways fraudsters operate, unsolicited calls are the most common. Research suggests 97% of complaints relating to ‘pension unlocking services’, a common term scammers use, stem from cold calls.
Losing even a portion of pension savings can have a devastating impact on later life plans and may leave some victims in a financially vulnerable position. In many cases, it’s impossible to claim the lost money back. After decades of building up a pension to support them through retirement, victims often find they can’t make up the shortfall.
While previous figures from the Financial Conduct Authority (FCA) suggested the average pension scam victim loses £91,000 of their pension provisions, new data demonstrates that it can be even more devastating. Intelligence published by Action Fraud revealed that two people reported losing seven-figure sums in 2017.
Nicola Parish, The Pensions Regulator’s Executive Director of Frontline Regulation, said: “Victims of scams are often traumatised by what has happened to them and many inevitably are left questioning how they are going to afford to retire.
“The average loss of a victim is £91,000 but these Action Fraud reports show that people can lose much, much more. However large your pension pot, you much be vigilant and able to spot and avoid a scam.”
A step in the right direction
While the cold calling ban is a step in the right direction, there’s still more work that needs to be done. In theory, it’s a step that should protect people. But we all know that if a criminal can still make money this way, there will be those that will continue to flout the ban and target pensions.
The ban should give pension holders the confidence to hang up when they receive a scam call. However, awareness of the ban, how to spot signs of a scam, and an understanding of pension regulations are all needed to reduce the crime.
So, what should you and your clients know even as the pension cold calling ban comes into force?
- Hang up the phone to cold calls: First up, is the awareness that cold calling is now banned. Should you receive unsolicited contact, hang up the phone and don’t pass on any personal details. A genuine advisory firm that you want to partner with will have taken note of the ban even if they used this method in the past.
- Pensions can rarely be unlocked early: The thought of being able to access your pension early is certainly appealing, it’s why fraudsters often claim they can do this. However, it’s only possible in very rare circumstances, such as being diagnosed with a terminal illness and can be completed by contacting your pension provider directly.
- If it sounds too good to be true, it probably is: Another common approach is to offer victims a chance to invest in high-return, low-risk investments. We all want to get the most out of our pension as possible, so it can be tempting. Be realistic about what your pension and investments can achieve. If it sounds too good to be true, ask yourself why more people aren’t doing it.
- Check who you’re speaking to: If you’ve been talking to someone about your pension, how do you know they’re genuine? The FCA register allows you to verify what you’re being told, as well as giving you contact details. Scammers may use the name of a genuine adviser or planners, so always establish communication via the telephone number given on the register.
- Don’t make pension decisions in a rush: Finally, don’t rush into any decisions about your pension or retirement. The choices you make could affect your financial wellbeing for the rest of your life. A genuine financial planner will recognise this and give you the space you need to make a decision at your own pace, as well as answering questions you may have.
If you or any of your clients have questions regarding pensions and retirement, please contact us.