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magazineThe Government finally gets tough on pension scams
Tuesday 6 March was a good day for retirement savers in the UK. After years of prevarication, the Government finally confirmed a ban on pensions cold-calling will be in place by June 2018.
This is an important step forward in the fight against fraudsters who target retirement savers. Most pension scams begin with a cold-call, so making this illegal should act as a serious deterrent.
For those who break the law, the Information Commissioner’s Office (ICO) will have the power to levy a fine of up to £500,000.
WHAT WILL THIS MEAN FOR YOU?
With a bit of luck – and provided the Government presses ahead on the timetable it has indicated – the number of nuisance calls, texts and emails should reduce.
If you do get a call from someone you don’t know about your pension, you should hang up the phone and report it to
the ICO.
While the cold-calling ban will hopefully put a stop to UK-based businesses targeting you in this way, we know some firms have already relocated abroad in order to circumvent the clampdown.
There is also the possibility that the sort of people who attempt to con savers out of their hard-earned retirement savings might simply flout the ban.
Furthermore, in the current low interest rate, low return environment retirement investors could still be tempted by investment ‘opportunities’ they find via the internet that might not be all they seem.
WHAT THE SCAMS MAY OFFER
Scams will often promise outlandish ‘guaranteed’ investment returns of 10% or more in order to lure you in. No investment returns are guaranteed, so this is a sure sign something isn’t right.
These schemes will usually be unregulated so anyone investing will be entering a world without the standards or protections enforced by the Financial Conduct Authority (FCA) in the UK.
Most non-advised SIPP providers won’t let you invest due to the risks involved, so you’ll have to strip your fund out and pay tax charges at your marginal rate of income tax.
Even if the investment is legitimate, you’d need returns of thousands of pounds just to get back to where you started.
It’s always worth bearing in mind the old maxim ‘if it sounds too good to be true, it probably is’ when deciding how to invest your pension money. If you’re in any doubt about what to do, speak to a regulated financial adviser or consult the Government’s free Pension Wise retirement guidance service before taking any decisions.
TOM SELBY, senior analyst, AJ Bell
Important information:
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