Pension scam clampdown: cold calling banned

Pension scam clampdown announced by Philip Hammond

The Autumn Statement will ban cold calls from people pushing pension investments. The move is an effort to clampdown on scammers taking advantage of pension freedoms in order to cheat pensioners out of their life savings.


The issue has come to a head because pension freedoms mean savers can cash in their entire pot at the age of 55 - subject to tax. It means that if scammers can persuade pensioners they are offering a genuine investment, and get them to transfer their pot into a bogus scheme, they could potentially get their hands on hundreds of thousands of pounds.


The potential criminal rewards mean scammers redoubled their efforts to con pensioners, bringing enormous risks for those wrestling with investment decisions on a scale that many had never faced before.

Scammers have invented a vast array of bogus investment opportunities from hotels and storage units to ethical projects and no-lose share investments. It has persuaded many people to part with all of their life savings - and they have lost every penny. The government itself estimates that eight scam calls are made every second - and £19 million is lost to the criminals every year.

The government said in a statement: "Philip Hammond will use this week's Autumn Statement to announce the government's intention to ban pensions cold calling, protecting millions of vulnerable people and cutting off the main route through which cowboys trick people out of their life savings."

How will it work?

The idea is to ban cold calling on this topic altogether, and give regulators the power to fine those who break the rules up to £500,000. The only people who would be able to call pensioners with an investment opportunity are the regulated companies that already have a relationship with them. Even if you have accidentally opted into receiving marketing calls from a company, they would not be allowed to call on this topic.

As experts have pointed out before, this will not stop the many criminal gangs based overseas from making these calls. However, it will give pensioners the certainty that any calls they get are breaking the law, so they should not respond to them.

Former Pensions Minister Ros Altmann congratulated Hammond on the move, saying: "Well done Philip Hammond - we have to do whatever we can to protect the public against fraudsters. Vulnerable elderly people are being called and offered free 'pension reviews' which lead to them losing their entire life savings. We need to be able to give the clear message that if someone contacts you out of the blue about your pension, they are breaking the law, they are criminals. By making cold calling illegal, it is much clearer for the public that they just should not engage with such people."

At the moment, the ban will not cover approaches by text or email, although the government will consult on the possibility of extending the ban to protect pensioners from approaches by scammers in any medium.

It will also consult on the possibility of giving extra power to pension companies to block transfers of savings to providers it thinks may not be genuine. And it will consider the small self-administered scheme structures that scammers often take advantage of.

Why now?

The move has come partly in response to a campaign from experts, including a petition launched by a financial adviser, and signed by thousands in the business. The total number of signatories has edged close to 8,000, but had not quite reached the 10.000 required for the government to respond. However, the expertise of those who have signed has encouraged Hammond to act.

Of course, it can't hurt that this will be a piece of good news he can announce in the Autumn Statement that won't cost the Treasury a penny, but will go down well with core voters. In fact, this is exactly what Tom McPhail, head of retirement policy at Hargreaves Lansdown, predicted at the beginning of this week.

He has welcomed the move, saying: "Pension scams can ruin people's retirement, sometimes casting a permanent blight on their quality of life, for the rest of their lives. Investors need protecting from unscrupulous unregulated salesmen, so we welcome this announcement. The government's plans to make it harder to register scam pensions in the first place and to make it easier for legitimate pensions businesses to block suspicious transfers are also important and welcome developments."

However, some are hoping this is just the beginning. Tom Selby, senior analyst at AJ Bell, told the BBC: "Policymakers must see this as the beginning of the process of tackling pension scams, not the end. Banning cold calling will cut off one of the heads of this many-headed beast, but the government, regulators and industry must remain vigilant and consider what further measures might be necessary to deter fraudsters."


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How we spend our pensions

Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.

A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.

Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.

Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.

Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.

A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement

Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.

Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.

Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.

The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.

While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.

Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to Unbiased.co.uk - because while baby boomers know how to have fun - they also know how to save for the future.

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