When I last wrote about scams, back in December, the Work & Pensions Select Committee was still in the midst of its inquiry, the Pension Schemes Act (PSA) was still a Bill and The Pensions Regulator had just launched its new Scams Pledge. A lot has changed since then, bringing clarity in some areas, but revealing there’s much more to be done in others, particularly in the online space.
The Bill is now an Act
You may remember that Work & Pensions Select Committee chair Stephen Timms MP had secured ‘assurances’ from Pensions Minister Guy Opperman that powers to override the right to transfer in cases of suspected scams would be included in the then Pension Schemes Bill’s accompanying regulations. The Bill became an Act in February, and the regulations are expected to be in place later this year. The Committee, in its new report on scams (more on this below), has also called for the legislation to be reviewed within 18 months of the regulations becoming operational, allowing for any legislative changes to be made if there are concerns.
Committee’s report on scams
The Work & Pensions Committee launched its report ‘Protecting pension savers – five years on from the pension freedoms: Pension scams’ last month, bringing together hours of oral evidence and a wide range of written submissions from across the industry, The People’s Pension included. The report is exhaustive, setting out over 30 recommendations for Government, the industry, regulators, Action Fraud and HMRC, and covers 4 areas: recording and reporting, prevention, enforcement and supporting scam victims. Many of the recommendations align with those set out in the report we produced in conjunction with the Police Foundation – ‘Protecting People’s Pensions: Understanding and Preventing Scams’ – particularly regarding the need for a broader definition of fraud, the creation of a central intelligence database and concerns over the pursuit of scams victims by HMRC. The Committee cited our report and our submission to the inquiry on the issues of a central intelligence database and the ‘unrelenting and uncompromising’ treatment of scam victims by HMRC.
A digital loophole
Central to the Committee’s report and recommendations, however, is the acknowledgement that more needs to be done in the digital world. The MPs called for global technology firms to be held to account for hosting scam adverts, saying it’s ‘immoral’ that companies such as Google are ‘profiting’ from hosting both scams and warning adverts. There’s no doubt that scammers have moved online, yet regulators are powerless to hold search engines and social media to account for hosting fraudsters’ scam adverts (unlike advertising in traditional media) and preventing them from creating clone websites of reputable companies. The law is just not keeping up with this fast-moving environment.
The narrow scope of the pensions cold calling ban, which came into effect in 2019, adds to the problem. The ban excludes online activity. So, fraudsters are able to continue to promote potentially harmful financial information to consumers on search engines and social media. In addition, the proposed forthcoming Online Safety Bill, which will create a new regulatory framework for online safety, excludes both ‘financial harms’ and online advertising (covered by a separate consultation). All of this creates a digital loophole for scammers to jump through.
Stephen Timms MP, his Committee colleague Nigel Mills MP, consumer group Which? and others across the financial services industry have called for financial harms to be included in the proposed legislation. In a recent interview with FT Adviser, Stephen set out his plans to table an emergency amendment to the Bill to bring financial harms into its scope when it comes before the Commons.
While the Pension Schemes Act includes some very welcome measures, there’s still a long way to go before consumers are adequately protected against ruthless criminals who would happily relieve them of their pension savings.