The UK government has responded to the Department for Work and Pensions’ Select Committee’s report on Britain’s pension scam crisis.
The report outlined plans to ban cold calling and encourage retirees to take advice, in a bid to reduce the number of people falling victim to pension mis-selling and outright scams.
Fears have been raised that the government’s 2015 pension freedom reforms have made it easier for scammers to target pensioners, with an increasing number of retirees accessing their retirement savings in full at the age of 55.
With many retirees looking for ways to maximise the savings they withdraw, scammers and unethical IFAs alike have been targeting these people in an attempt to encourage them to part with their life savings.
Often, scammers will promise high returns and low risk investments, only for retirees to lose thousands of pounds of life savings further down the line.
In response to the report, the government has agreed that savers need greater protection against pension scam criminals and admitted that the threat needs to be limited “by cutting scamming activity at the source, in order to disrupt criminals and protect savers.”
It added that it “also agrees with the committee about the need to ensure more people can benefit from pensions guidance to help them to understand their options and make decisions that are right for them.”
The government is proposing to ban all pensions-related cold calls. However, industry experts believe MPs’ promises aren’t sufficient. Tom Selby, senior analyst at AJ Bell, said: “The government continues to talk tough on tackling pension scams but we still have no idea when the proposed ban on cold calling will come into place.
“It has now been well over a year since the ban was originally announced and almost three years since the pension freedoms were launched. It is unacceptable policymakers have taken so long to introduce such an important consumer protection measure and implementation should now be fast-tracked.”
Many believe that more financial education is required in order to educate savers on signs of mis-selling. Jane Goodland, responsible business director at Old Mutual Wealth, said: “Knowledge is the main issue. Understanding of pensions is declining and numbers from the Office for National Statistics show that disturbingly 58% of the adult population don’t think they have sufficient understanding of pensions to save for their retirement – the highest number since the question was first asked in 2010.
“It is crucial we tackle the growing epidemic of financial illiteracy. Research shows one of the reasons people switch off when it comes to finance is because they don’t understand, and this is a growing issue we need to combat.”