Consultation on pension liberation scams

The pensions sector can take a number of positives from the Autumn Statement. Whilst a few tax loopholes on income draw down reinvestment and the use of foreign pensions are closed, maintaining the triple lock for current pensioners and salary sacrifice arrangements for those still contributing will continue to make pensions saving attractive to the public. This will give further support to the industry in the final stages of the roll out of automatic enrolment and is particularly important given the Chancellor’s pledge to continue with the planned launch of the Lifetime ISA next year.

The most welcome news, however, is the announcement of the consultation to ban cold callers preying on those who are considering cashing in their pension pots. The scandal of pensions fraud has gone on for too long, and as our own research shows, the problem has got worse since the introduction of the pensions freedom reforms last year. Almost 11 million pensioners are being targeted annually by cold callers, with savers reporting estimated losses of almost £19m to pensions scams between April 2015 and March 2016. There will also undoubtedly be more losses that have gone unreported.

Importantly, the consultation will also consider strengthening the role that scheme trustees and pension providers can play in preventing members from making the wrong life changing decision. This will help protect members of the public who are failing to ask the basic question that - if it looks too good to be true, it probably isn’t.

We await the scope of the consultation with interest but we shouldn’t however be as naïve to think that this type of fraud will instantly stop as a result of the measures that follow. It is difficult to see how the public can be protected from overseas callers that will remain outside of UK jurisdiction and these will certainly still continue. The introduction of powers for trustees and pension providers to stop suspicious transactions will therefore be vital together with the legal changes that will be necessary to allow this to happen.

The immediate challenge is getting these changes made as soon as possible. We must hope for a short consultation period and a quick reaction in making the changes necessary to protect pension savers and prevent the reputation of the pensions industry from further damage.