The government's decision to speed up its ban on cold calls and emails related to pensions must be supported by credible regulations and deterrent fines if consumers are to be protected, industry commentators have said.
A new clause in the financial guidance and claims bill, tabled by the Department for Work and Pensions at the behest of HM Treasury, gives DWP secretary Esther McVey the power to introduce regulations against "unsolicited direct marketing relating to pensions", and requires this to be done by June this year.*
The government had previously committed only to banning cold calls and emails before 2020.
With the new amendment, McVey would have to explain her inaction to parliament if the ban has not been introduced by June this year.
Relocating abroad will cost scammers money and some might simply decide it isn’t worth it
Tom Selby, AJ Bell
The DWP will also continuously review the possibility of a cold call ban for financial products other than pensions.
Further amendments rejected the possibility of forcing savers to take independent financial advice before accessing pension freedoms, instead envisaging a soft default path towards the new single financial guidance body.
In a statement, chair of the Work and Pensions Committee Frank Field welcomed the government's additions and said the new bill was "within spitting distance" of the committee's recommendations.
"I am delighted that they will be bringing forward a ban on pensions cold-calling by June, as we called for," he said. “This represents a major leap forward in the urgent fight to protect pensioners’ savings against scams and sharp practice.”
Doubts persist on enforceability
For all Field’s enthusiasm, some have expressed doubts about the enforceability of any future ban, and question whether it will fulfil its laudable aim.
“If they’re going to make regulations there is no point unless they are in principle enforceable, and secondly actually enforced,” said Ian Neale, director at pensions intelligence service Aries Insight. “Otherwise it’s just waving a flag.”
One key concern is that scammers and cold-callers may simply move their operations overseas, where they can act with impunity.
Neale also questioned the suitability of the processes used by the Information Commissioner’s Office when applied to pensions.
The ICO issued a £300,000 fine against Holmes Financial Solutions Ltd in January, but not until it had made 8.7m nuisance calls.
“I suspect [scammers] treat the risk of a fine from the ICO as part of the cost of doing business,” Neale added, but admitted that the legislation may give consumers greater confidence to stand up to questionable practices.
Fines must be serious
Others are more optimistic about the ban. “It is absolutely true that the ban will be circumvented by some who go overseas, while others might simply break the law,” said Tom Selby, senior analyst at brokerage AJ Bell.
“That isn’t a reason not to do it though,” because “relocating abroad will cost money and some might simply decide it isn’t worth it”.
Cold call from a pensioner
Editorial: A call to Pensions Expert from an elderly gentleman looking for someone who could help him access his pension pot shows the vulnerability and lack of support older people face at retirement and beyond when making financial decisions.
Significant fines issued early on could well prove a deterrent for cold callers, and should be followed up by a concerted effort from government and regulators to further protect consumers, Selby added.
“A permitted investments list for [self-invested personal pensions] is one option – scaling up the teams who investigate reports of dodgy schemes is another,” he said.
*This article has been changed to clarify statements around the DWP's involvement in the proposed ban.
