Ian Neale from policy specialists Aries Insight takes a closer look at the government's proposals on banning pension cold calls.

In the response, the government promised that:  

Members asking to transfer could be required to prove they are employed by an active employer; one who actually sponsors the receiving scheme

  • a ban on cold calls about pensions will be implemented and extend to email and texts;  

  • the Information Commissioner’s Office will enforce the ban (though it will be unable to take action against overseas firms, unless the calls are made on behalf of a UK company);  

  • those breaching the cold-calling ban will only be liable for fines, not criminal sanctions or custodial sentences;  

  • members exercising a statutory right to transfer between occupational pension schemes will have to provide evidence of an employment link with the receiving scheme;  

  • limitations on the statutory right to transfer will not prevent “legitimate” transfers to Qualifying Recognised Overseas Pension Schemes;  

  • legislation on transfers is to accompany the new authorisation regime for mastertrusts (not forthcoming before late 2018); and  

  • dormant (ie non-trading) companies will not be able to register new pension schemes, “except in legitimate circumstances, where HMRC will be given discretion” – the government has again rejected reintroduction of pensioner trustees to control risks associated with small self-administered schemes.

Key points

  • It’s hard to define an effective ban on cold calling

  • An employment link between individual and receiving scheme might work

  • Government-backed education to promote social awareness is most promising

The focal point of attention has been the proposed ban on cold-calling. Stephen Barclay, economic secretary to the Treasury, has promised draft legislation next year, with "an ambition to try and act before 2020".  

In its response to the consultation, the government acknowledged that the legislation "must be future proofed, to prevent the evolution of scams that avoid the ban” and “will seek to prevent fraudsters using the sorts of ‘workarounds’ raised by respondents”. 

Bearing in mind that investments other than pensions will be out of scope, defining conversations that breach the ban will be a tall order. It seems from the delays and ministers' comments that the government realises the difficulties in stopping bad behaviour simply by making it illegal. 

Criminals will not be deterred unless and until the likelihood of being caught and convicted is significant and the penalty is severe enough to render their activity uneconomic. 

There is no value in laws that are unenforceable, or not enforced. While it might be simple to ignore an email from an unrecognised sender, a telephone call from withheld number could be from your doctor, so you take the call. 

Individuals are unlikely to be able to record the call (and if they do, the caller has to be told).

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If contact details of a suspicious caller are obtained, they need to be reported to the ICO. To prosecute an offender, the ICO will need evidence that a concerted effort was made, from within the UK, to reach thousands of potential victims and that the calls were not exempted as 'legitimate business', such as market research or existing customer referrals.  

There are better ways to tackle scams: some are already being considered.

For example, when a pension scheme member asks to transfer to an occupational pension scheme, they could be required to prove they are employed by an active employer; one who actually sponsors the receiving scheme. At present neither of those connections is necessary.

If pension scheme administrators could check that money is not being transferred into a fraudulent scheme by verifying the connections between the member, their new employer and the scheme, that would be a more effective way of safeguarding the public from scams.

Again though, defining in law what constitutes an employment link is tricky (payslips can easily be forged). The House of Lords has amended the financial guidance and claims bill to require an annual report on cold-calling from the planned single financial guidance body (after 2020). 

Eventually this body could be effective in promoting public awareness of the cold-calling ban, and thus raise resistance to scammers. Slogans like 'just say no' sound trite; but consistent messages to savers from employers and trustees, as well as government, could make a difference.   

Ian Neale is director at policy specialists Aries Insight

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