The original ban, announced in the Autumn Statement 2016, was put on hold when the Conservative Government called a snap election in May.
The latest version will ban not just telephone calls but also emails and texts in a bid to clamp down on scammers. It will be policed by the Information Commissioner’s Office.
Cold calling is the most common method of initiating pension fraud, with 97% of cases brought to Citizens Advice in 2013 stemming from cold calls.
IFA doubt
Although respondents to the initial consultation “overwhelmingly supported the ban”, a few IFAs and lead generation firms did not, HM Treasury said.
They argued that consumers benefit from cold calling in relation to pensions, since they have a high level of inertia about them, and it is important to contact them directly to encourage them to take action in relation to pensions or seek financial advice.
These respondents said that cold calling therefore leads to improved retirment outcome.
“These views were not shared by all financial advisers who responded,” Treasury said.
Most respondents felt that the risk of losing a pension fund to fraudsters outweighs any potential detriment caused by interia in relation to pensions or by not seeking financial advice.
No exemption
The ban will have a wide scope to prevent it being circumvented and there will be no exceptions.
Treasury said an important rationale for introducing the ban is so that consumers will know that no legitimate firm will cold call them about their pension.
“Attempting to carve out certain activities would confuse this message,” it said.
Pension scam crackdown
The cold calling ban formed part of a pension scams consultation response paper that was released on Monday outlining several measure the UK Government is taking to tackle the issue.
It is understood that not all of the measures will be attached to the second finance bill of 2017, which includes several other measures dropped owing to the snap election.
There are worries, however, about finding parliamentary time to get the measures through given the Brexit process.
HM Revenue & Customs is set to play a role in ensuring small self-administered schemes (SSAS) can only be set up by an active company.
Trustees are expected to play a greater role in checking that receiving schemes are legitimate with pension providers and schemes better able to block suspicious transfers.
The government says it will ensure that only active companies, which produce regular, up-to-date accounts, can register pension schemes.
Limiting transfers of pension pots from one scheme to another will mean trustees must check the receiving scheme is regulated by the Financial Conduct Authority, has an active employment link with the individual, or is an authorised master trust.
The government has also released figures suggesting that almost £5m ($6.4m, €5.5m) was obtained by pension scammers in the first five months of 2017 and £43m has also been unlawfully obtained by scammers since April 2014, with those targeted having lost an average of nearly £15,000.
Dented business models
Tom Selby, senior analyst at AJ Bell, says: “The measures announced by the government should put a severe dent in the business models used by these fraudsters, giving savers more confidence their valuable pensions will be safe from criminals.
“However, it is concerning there remains no set date for implementation and we urge policymakers to fast-track these vital protections through Parliament as a matter of urgency.”
