The government is aiming to introduce a cold-calling ban before 2020 and has opposed the idea of compulsory guidance, as the Work and Pensions Committee continues to probe officials as part of its wide-ranging inquiry into pensions freedoms.
During the hearing, chair Frank Field and other committee members questioned witnesses from the Pensions Regulator, the Financial Conduct Authority, HM Treasury and the Department for Work and Pensions.
We have an ambition to try and act before 2020
Stephen Barclay, HM Treasury
Pension scams featured heavily in the hearing, as the committee pushed for more details on the cold-calling ban.
Stephen Barclay, economic secretary to the Treasury, said that the government’s intention is to put in place a ban on pensions cold-calling before 2020. While the government agrees that pensions cold-calling needs to be banned, it has previously said it may not be able to legislate against it until then.
“The concern with the amendment in the [House of] Lords is... it says that the single financial guidance body can bring forward an annual report. On the basis of that annual report, legislation can be brought forward. The potential flaw in that is, that means 2020,” Barclay explained.
This is the reason why the government is bringing forward draft legislation in 2018, “because we have an ambition to try and act before 2020”.
Government against mandatory guidance
At the beginning of November, the House of Lords pushed for default guidance for pension savers, a topic that was discussed as part of an earlier committee hearing during which former pensions minsters were questioned.
In response to a question by Alex Burghart, Conservative MP for Brentwood and Ongar, over whether the government is “considering ways of introducing default guidance to increase the take-up of Pension Wise”, minister for pensions and financial inclusion Guy Opperman said the government does not believe mandatory guidance “is the appropriate way forward”.
He emphasised how the creation of one financial guidance body, merging the Pensions Advisory Service, the Money Advice Service and Pension Wise, is the “single best thing we are doing” to boost take-up as “a holistic one-stop shop”.
Opperman disagreed with select committee member Steve McCabe’s comment that take-up of Pension Wise guidance has been “abysmal”.
Charlotte Clark, the DWP’s director for private pensions, said 61,000 specific Pension Wise appointments had been recorded in 2015-16 and 66,000 in 2016-17, while “in the first six months of this year we’ve had 40,000”.
The committee probed the government, asking them to provide clarity and context in terms of what these figures mean.
“66,000 out of how many? What’s the total figure that could be using the system?” asked McCabe. He added: “Everything I see tells me the take-up is really poor, you’re telling me, 'No that’s not true – the take-up’s really good'. I’m asking – how do you know that?”
Field highlighted that earlier in the hearing, Christopher Woolard, director of strategy and competition at the FCA, had said half a million people were using Pension Wise. Field compared this with the much lower 66,000 figure cited by the government, but the DWP could not give a clear explanation for the discrepancy.
We need action on cold-calling now
From the blog: We live in an age in which the internet finds something to promote or celebrate every day, week or month, from cupcakes to allotments. July happened to be Scams Awareness Month.
Field said: “We’ve got these terrible scams going on… we’re not attacking you… we think it’s a good service, but we’re just worried about the number of people out there exposed to some very nasty people”.
Legislate cold-calling ban before it is too late
Pension scams caused concern in the hearing, noted Malcolm McLean, senior consultant at Barnett Waddingham, but added: “I didn’t find the answers too convincing.”
The government was also “a little bit vague as to when the draft legislation was going to appear on cold-calling, they seem to be still thinking it through as to how it’s going to work”, he said.
McLean noted there were concerns over how to stop overseas cold calls, for example. However, he said he does not think that this should contribute to delaying a UK ban.
“Let’s have the legislation on cold call banning up and running, and if it’s not a complete answer, at least it’s better than what we’ve got at the moment,” he said.
Overall, “I don’t think the committee or anybody else is going to seriously suggest scrapping pension freedoms, but I think there will still be a number of pensions, particularly about the scope for pension scams, which are not a direct consequence of pension freedoms, but have certainly been made easier for the scammers”.
