On 5 December 2016, the UK government launched a consultation on pension scams. The government is asking for responses to four proposals aimed at making it harder for boiler room operations to scam people out of their pensions.
The deadline for responses is midnight, 13 February 2017. Click on the image to go to the consultation page:
Send responses by email to:
The consultation website explains that the aim is to put in place series of measures to address three areas of pension scams:
- a cold calling ban will cut off a key source of pension scams whilst also sending a clear message to consumers that they should hang-up if they are cold called about their pension
- current legislation gives pension schemes limited scope to refuse a transfer to a scheme which looks like a scam, even if they have legitimate concerns as to the safety of a member’s savings. We are consulting on clarifying the law so that firms can block pension transfers based on clear objective criteria
- single-member occupation pension schemes currently require no registration with The Pensions Regulator, and can be set up using a dormant company as the sponsoring employer. They are therefore an easy way for fraudsters to register a pension scheme with HMRC. We are consulting on making it a requirement that only active companies can register a pension scheme
These are, it seems to me, sensible ideas. Of course, it would have been better if the government had thought this through before April 2015 when it introduced “pension freedom” reforms, allowing people over 55 to access as much of their pension pot as they want to.
Citizens Advice was asking for a ban on financial services cold calling back in May 2013.
A timeline to this pension scams consultation
In September 2016, Darren Cooke of Red Circle Financial Planning launched a parliamentary petition calling for a ban on all cold-calling related to pensions or investments. 8,509 people have so far signed the petition.
In November 2016, the government announced that it was going to ban cold calling to sell pension investments. It was widely reported in the UK media that Philip Hammond, the UK chancellor, would announce the ban in his budget statement on 23 November 2016:
Philip Hammond did not announce a ban on cold calling. Instead, in his budget statement, he announced that the government would hold a consultation before Christmas:
I’ve been writing about boiler rooms and investment scams for the last four years. I’ve written more than 170 posts about investments in carbon credits, biofuels, logging operations, REDD, timber plantations, pyramid schemes, Voice over Internet Protocol (VoIP) schemes, VAT fraud, and bamboo plantations.
Many of these scams relied on cold calling and high pressure sales techniques from boiler room operations. Some of the people on the receiving end of these scams lost their life savings. Their stories are heart breaking.
A ban on cold calling in relation to pensions should be implemented as quickly as possible, with as much publicity as possible. The ban wouldn’t stop scammers from cold calling, but it would at least send out a clear message that such calls are illegal. No legitimate company would cold call you with financial advice.
The ban should be extended to cover email. And it should cover all financial advice, not just pensions advice.
Another step could involve tightening up the regulation of what companies are allowed to say about the investments they are offering. I recently wrote about a company called Property Frontiers in Oxford. In 2011, Property Frontiers made claims of “returns up to 895%” on its investments. Today, the investment is slowly unravelling.
A ban on on cold calling is only a small part of the action needed to address investment scams in the UK. Serious police action is needed to bring the scammers to justice. Some scammers have been jailed. Unfortunately, they are the exception.
Very large numbers of scam boiler room operations are targeting people in the UK. So far the authorities’ response to these scammers is what makes the UK part of the problem, not the solution, to addressing global investment fraud.