The Government is being urged to ban cold calls and require people to take or expressly opt out of guidance before they’re able to access their pension pot.
To do this, the Work and Pensions Committee are calling for the Government to utilise the Financial Claims and Guidance Bill to improve safeguards for vulnerable consumers against scams, as well as enabling them to make better informed decisions over their pensions.
Whilst the Committee highlights that the current scale of pension scams is high, it suggests that the reported level is likely to be an underestimation, with the full scale potentially not emerging for several years.
By using the Financial Guidance and Claims Bill, the Committee believes that the serious preventative steps could be taken against scams and is calling for Government to implement its proposals.
These are:
- A ban on cold calls, with the introduction of a clause to ensure it’s implemented by June 2018 at the latest. The Committee propose that the details should be in the form of regulations, enabling outstanding issues to be resolved without having to go through the parliamentary process.
- Strengthening of the “guidance by default” Clause 5(2) to ensure that prior to receiving access to a pension pot, the individual must either take or expressly refuse guidance. Following a public consultation, details should be set out in Financial Conduct Authority rules. The Committee states that by providing guidance by default, pensioners would be more inclined to shop around, as well as more informed prior to making financial decisions.
Commenting on the need for the proposed measures was Rt Hon Frank Field. The Chair of the Committee stated: “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.
“Low saver engagement and high financial value makes pensions rich pickings for scammers offering fantastical returns or seemingly clever advice. The strongest weapon in the armoury against this is good advice and guidance – people just aren’t 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. The Government should use the Bill that has just arrived in the Commons to legislate to protect pensions now.”
