The government's expected blanket-ban on pension cold-calling is expected to come into force next month, forming part of the government's plan to fight financial scams that have seen an estimated £1 billion wiped from ordinary people's retirement savings. The ban, which will also include unsolicited emails and text message comes too late for those people who have already lost money to such scams, but will hopefully see people better protected in the future.
Pension scammers usually contact their victims out of the blue, via an unsolicited phone call, email or text, offering a pension review of investment opportunity. Many claim that they can 'unlock' pension pots early, before the age of 55, something which is actually illegal in most cases and also triggers a 55% tax charge from HMRC.
Estimates suggest that £27 million a month has been lost to pension scams since the launch of pension freedoms in 2015, which saw savers have much more choice what to do with their pension pots. This estimate may be conservative however, because many people are embarrassed about being the victim of fraud and do not report it. Others may not be aware that they are victims of a scam, and will only find out they are years later when trying to access their pension pot.
However, the cold-calling ban won't stop all scams says Michelle Cracknell, chief executive of The Pensions Advisory Service which provides impartial guidance to people looking for help on what to do with their pension funds. She says the ban is a welcome step but points out that fraudsters' traps are constantly evolving.
"The ban will not stop pension scams as the pickings are too great. Customers are still being cold-called but we are seeing new methods being employed. For example, contact through social media, following up on people who have previously used a claims company for payment protection insurance redress or those who have completed surveys. Many scams also rely on customers recruiting friends and family."