The Government is set to unveil a crackdown on the abuse of small self-administered schemes (SSASs), when it confirms a ban on pension cold calling in the Autumn Statement on Wednesday.
But the new rules will not stop scammers from ripping off pension savers, as they will find other ways to take their money, warns The Pensions Advisory Service chief executive Michelle Cracknell.
The Chancellor is expected to issue a consultation that will require all calls where a business has no existing relationship with the individual to be forbidden, and will also hand providers extra powers to block suspicious transfers, in a bid to tackle soaring levels of fraud and misselling to vulnerable pensioners since pension freedoms were introduced in 2015.
The main new control on SSAS arrangements is likely to be a requirement that there is a legitimate employer/employee relationship in place. Under current rules individuals can join a SSAS, which is an occupational scheme, even though there is no employment relationship with the organisation.
Cracknell says: “It is fantastic that they are taking this step, but it won’t stop the scams. There is too much money at stake, so they will find other ways to rip people off. We need to continue to work hard to raise awareness of scams. But people will remain vulnerable.”
AJ Bell senior analyst Tom Selby says: “The scourge of pension scams has already caused huge damage to thousands of savers’ retirement dreams, with many left penniless after being targeted by increasingly sophisticated fraudsters. The combination of measures set to be announced by Chancellor Hammond should act as a real deterrent to scammers and sends a clear signal the Government is at last taking this issue seriously. We look forward to seeing further details at the Autumn Statement.
“SSASs are a legitimate retirement planning vehicle that have been abused by scammers. For example, we have seen large numbers of savers attempting to join suspicious SSASs who have no connection to the employer linked to the scheme. Tackling such abuses would protect savers and help clean up the SSAS market.
“Providers have also struggled to block suspicious transfers in the wake of the Hughes v Royal London High Court ruling. This said savers have a legal right to transfer even if they do not have earnings from the employer linked with the scheme – and even where there is evidence the scheme is being run by scammers. Since this case there has been a need for policymakers to redress the balance so providers have the power to protect scheme members.
“However, this welcome move by the Chancellor must be seen this as the beginning of the process of tackling pension scams, not the end. Banning cold calling will cut off one of the heads of this many-headed beast, but the Government, regulators and industry must remain vigilant and consider what further measures might be necessary to deter fraudsters.”
Aegon head of pensions Kate Smith says: “The true extent of pension fraud is unknown, and some people may not realise they have fallen victim to a scam for some time. Once a scam has taken place it’s almost impossible to get the money back. The proposed ban on cold calling is a major step forward but it needs to go further to cover texts and emails other common techniques used to try to part people from their hard-earned cash. Scams are constantly evolving as soon as you remove one fraud method, another variant on the old scheme pops up. A ban on cold calling won’t be foolproof, but at least it will put more people on their guard and criminalise those who make the calls. People should remember the old adage, if something looks too good to be true it probably is.
“Fraudsters try to ‘groom’ their victims making it difficult for pension providers to raise concerns with their customers about suspicious transfers or tipping off the fraudster. Giving pension providers more powers to block suspicious transfers is something we’ve long-called for and will protect customers from future scams, but the devil will be in the detail.”