The new FCA/TPR ‘ScamSmart’ campaign has been welcomed by stakeholders from across the pensions industry, but former pensions minister Baroness Ros Altmann says the campaign, combined with the delayed cold-calling ban which is expected to come in this autumn, will not do enough to protect consumers.
Figures from City of London Police obtained by AJ Bell show the level of scam losses increasing, with£51m of investment fraud reported to City of London Police from April to June 2018, up from £30m in the same period last year. Scammed pension savers are understood to have lost an average of £91,000 each.
Altmann says the Information Commissioner’s Office, which is to be charged with policing the cold-calling ban, does not have sufficient powers to successfully deter scammers. Instead she argues that firms should be prohibited from receiving assets generated by cold-callers.
Altmann says: “The cold-calling operations are highly sophisticated and FCA-regulated providers can use such leads and still trick people into losing their life savings or transferring into poor investments. The public don’t know the difference between a call on behalf of bona fide firms or fraudsters and the Regulators’ survey found one in three people would not know how to check if they were speaking to a legitimate pension adviser or provider.
“The Government’s campaign messaging suggests people ‘check the FCA register or call the FCA on 0800 111 6768, to see if a cold-calling company is from a firm authorised by the FCA. It also says to call ActionFraud on 0300 123 2040 to report a suspected scam. However, trying to get through to these ‘hotlines’ can take half an hour of holding on, which will deter most people. And most members of the public would not bother to check registration details. Therefore, it is also vital that more effective, stronger measures are put in place to implement a cold-calling ban as soon as possible.
“A proper cold-calling ban is urgent, but Government is consulting again and measures won’t work: No doubt the Treasury and DWP have good intentions, but the proposed changes are little more than minor tweaks to existing rules which are clearly ineffective, with heavier penalties if the perpetrators are caught. The new rules will still rely on the Information Commissioner’s Office (ICO) to implement the ban and, unhelpfully, cold-calling in some circumstances will still be allowed. That makes it impossible to tell people that all unsolicited approaches are against the law. For example, calling someone and claiming to be from their pension provider would be an easy way to circumvent the new ban.
“The proposed new rules still rely on the ICO catching and punishing cold-callers. By definition, this will only be after they have already been scammed. This will not deter determined cold-callers, so I believe it is essential to introduce better ways to prevent unregulated lead generators from obtaining and passing on people’s details. In the UK, such firms are normally small, fly-by-night operators who would fall below the radar of the ICO – which only goes for large-scale cases and relies on them remaining traceable for the 18 months it takes to conduct an investigation. Most of the companies, in any case, are based offshore, and will not be covered by the new rules, making the ICO’s powers inadequate to actually be effective.
“To better protect the public, the FCA should ban firms from using leads generated by cold-calling: As well as banning all cold-calls about pensions, it is also important to ban the use of any leads obtained from cold calls. The FCA should instruct all regulated pension firms that they must not sell their products to people who have come to them via a cold-call. The FCA could change its rules now, to prohibit use of cold-calling leads. The sooner it does so, the better.”
AJ Bell senior analyst Tom Selby says: “Scammers continue to hound retirees on a daily basis, devising increasingly complex and convincing methods to deceive unwary savers into handing over their hard-earned pensions.
“Since April 2015, when the pension freedoms were introduced, fraud activity has increasingly and unsurprisingly targeted over 55s, often luring people to part with their retirement pot by promising huge returns over a short period of time.
“Scammers can now target savers in all manner of ways, particularly through social media, and there is clearly a limit to what regulation and Government intervention can achieve.
“If more people are familiar with the signs of a scam then retirees should become less easy prey for these bottom-feeding fraudsters.”