MPs launch investigation into pension scams

The Work and Pensions Select Committee has launched an investigation into pension scams as part of its inquiry into pension freedoms. The inquiry will commence after the parliamentary break and will initially focus on current trends of pension scams and existing tools for enforcement. It will then move on to look at how people access pension savings. The committee is asking for respondents’ views to be submitted by 9th September. The committee has appointed Labour MP Stephen Timms as its chair. Handing savers total freedom and choice over how they spend their pension pot from age 55 was always going to make them "a prime target" for pension scammers according to Tom Selby, senior analyst at AJ Bell. He said: “While the Government was initially slow to grasp the magnitude of this risk, in recent years we have seen a far greater focus with pensions cold-calling banned and a nationwide advertising campaign launched by the FCA. “It is vital that policymakers and the wider pensions industry continue to monitor scam activity and take action where possible to protect savers. “But given fraudsters usually, by definition, operate outside of regulatory boundaries, the most effective way to protect people is to arm them with the information they need to avoid falling victim in the first place.” Jon Greer, head of retirement policy at wealth manager Quilter, said that it is important that the investigation take a consultative approach with the industry. He said: "Many reforms were retrofitted into the system after pension freedoms had come into effect, and could have been considered from the outset had there been a more consultative approach. “As the consultation moves beyond scams to look at the wider impact of pension freedoms we’d also like to see MPs consider whether aspects of the system are working as they should. The Money Purchase Annual Allowance, for example, is a contradiction to the principles of freedom and flexibility. Government should consider whether this is achieving the desired outcome and explore whether a general anti-abuse approach could work better than the rigid, strict approach currently employed.” PIMFA, the trade association for wealth managers and the financial advice industry, has welcomed the launch of the investigation and said it has raised “significant concerns about pension scams for some considerable time.” Simon Harrington, senior public policy adviser at PIMFA said: “Pensions scams have become a significant problem in recent years but in the wake of the Covid-19 pandemic PIMFA has become particularly concerned about the increase in scams aimed at people that might be approaching retirement and have seen significant losses in their pension fund in recent months. “Another target of pension scammers have been those people approaching the age of 55 - though we have also seen evidence of people as young as 35 being encouraged to unlock the cash in their pension at the urgings of unscrupulous individuals. “All too often consumers are encouraged to take money out of their pensions to invest elsewhere. They are told what they are investing in is low risk, while offering high returns. Moreover, such products are not always marketed to sophisticated or high-net-worth investors. In fact, according to the FCA targets often include retiring police officers, nurses and those that have recently left the Armed Forces, while the average loss victims suffer is now as high as £82,000.” “PIMFA is extremely concerned about pension scams and feels that the public needs to have more information at their fingertips about the dangers posed by what are often very sophisticated scams. We look forward to contributing to the investigation of the Work and Pensions Select Committee with our recommendations of how to tackle this issue, and continuing our work with our existing partners."

MPs launch investigation into pension scams

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