Scams rise up the parliamentary agenda

As Pensions Minister Guy Opperman noted in his keynote speech to the PLSA conference on 14 October, scams are the subject of increasing parliamentary scrutiny.  We’re pleased to have played our part in bringing this important issue to the attention of MPs and peers of all political persuasions.

In September, we published our report, Protecting People’s Pensions: Understanding and Preventing Scams, in conjunction with the Police Foundation, and it has added real substance to the debate.  The Work and Pensions Select Committee, under the leadership of Stephen Timms MP, also launched an inquiry into scams – the first of three inquiries examining the pensions landscape five years on from pension freedoms. We submitted a summary of our scams report to that inquiry, and asked MPs across the House to table parliamentary questions on a range of key issues, including:

  • The impact of Covid-19,
  • The increase in online scams
  • The approach taken by HMRC to pursuing victims
  • How scams are being reported.

Mini debate in the Lords

Last week, the issue received focused attention in the House of Lords. Labour peer Baroness Warwick of Undercliffe, tabled an oral question: To ask Her Majesty’s Government, further to the report by the Police Foundation and The People’s Pension Protecting People’s Pensions: Understanding and Preventing Scams, published on 7 September, what action they are taking to protect people from pension scams?

In the Lords (unlike in the Commons) oral questions take the form of a mini debate, where peers can come in with supplementary points for up to ten minutes. Baroness Warwick’s supplementary question focused on one of the report’s key recommendations, ensuring that victims of pension fraud aren’t pursued by HMRC. Baroness Altmann took up the call for a central intelligence register; Baroness Drake highlighted the report’s recommendation of extending the powers of the regulator; Baroness Sherlock pointed out the key issue of the cold-calling ban excluding online activity; and Lord Taylor highlighted BAME vulnerability to scams and quoted our ethnicity pensions gap research. Crossbench peer Lord Loomba welcomed the report and calling for strengthened checks on company registrations. Most of the key issues and recommendations in the report were picked up.

Work and Pensions Committee

The Work and Pension Committee has so far heard from industry organisations including PSIG, Which? and PIMFA about both the scale of the problem and how it should be tackled. Earlier this month, the Financial Conduct Authority gave evidence that it’s investigating 85 companies for possible pension scam concerns.

On the back of hearing hours of compelling evidence, Committee chair Mr Timms signalled his intention to lay an amendment to the Pension Schemes Bill, which had its second reading in the Commons last week. This amendment, which has cross-party support, would enable scheme trustees to stop a transfer if red flags are raised. It builds on an earlier proposal by Margaret Snowdon, the chair of the Pension Scams Industry Group, who wants providers to be given the power to block a transfer amid any suspicions of fraud.  One of the recommendations in our scams report called for powers which would enable trustees to flag up concerns over a transfer to the regulator with oversight by The Pensions Ombudsman, who has the necessary legal powers to adequately censor fraudsters.

Pension Schemes Bill

In its current form, the Bill contains clauses intended to restrict the statutory right to transfer when particular criteria are satisfied. Clauses specified include satisfying trustees about an individual’s place of residence or employment and that an individual has obtained information or guidance about the transfer from a prescribed person. This is better than nothing, as it will make it harder to operate a scam that masquerades as an occupational pension scheme where there’s a bogus employment relationship between scammer and victim.

A dogged scammer, however, will find a way around this as payslips can be fabricated and unwitting victims can be coached through guidance sessions. In addition, the measures currently in the Bill only apply to occupational pension schemes and do nothing in relation to transfers into substandard SIPPs.

The Bill is expected to begin its Committee stage (where it’s scrutinised in detail, line by line) in early November. While we can’t predict what the finished Bill will look like before it’s passed into law, we hope that the Government will listen to the strong concerns that have been expressed, recognise the plight of victims and ensure that the public have greater protections against this most pernicious of financial crimes.

Read more

Read the report, Protecting people’s pensions: understanding and preventing pension scams.

The Pension Schemes Bill – the story so far

Big pieces of legislation that radically alter how pensions operate don’t happen very often. In fact, the last major change was the Pension Schemes Act 2017, which brought in master trust regulation. The Pension Schemes Bill is about to make its way through the House of Commons, following its progression through the House of Lords with some surprising defeats for the Government.  More on that shortly…

The Pension Schemes Bill

The Bill lays the groundwork for the creation of the pension dashboards as an online portal that will allow people to see details of all their pension entitlements in one place. The portal is intended to support a public, non-commercial dashboard run by the Money and Pensions Service (MaPS) and commercial dashboards run by individual pension providers.

Many people have more than one pension pot. The DWP estimates that people will have an average of 11 jobs in their lifetime with possibly a pension pot for each. People will ask, “what have I got and where is it?” and dashboards will give them that window on their savings.  As Baroness Jeannie Drake commented, “Technology should be harnessed for the public good, empowering and informing citizens. The dashboard has that potential by reuniting the consumer with all their savings pots, including smaller ones that they may have lost track of.”

Our policy ‘asks’

Since the Bill was re-introduced in January (following the pause for the general election), we’ve been setting out what we’d like to see with members of the Commons and Lords and in behind-the-scenes meetings with civil servants. These policy ‘asks’, as we call them, fell into two categories:

  1. The provision of a public (non-commercial) dashboard run by MaPS first, gaining consumer trust, before commercial dashboards are introduced; and
  2. Reassurance that commercial dashboards can’t be used as a sales channel, without protecting consumers from mis-selling and other risks so often associated with pensions.

The Government suffers two defeats

Although the Bill had wide cross-party support, a number of peers (members of the House of Lords) shared our concerns about consumer protection. The Government introduced a clause requiring MaPS to provide a public pensions dashboard service, which was welcomed by all parties, but two surprising defeats lay ahead for them.

Firstly, the Government was defeated on an amendment tabled by Baroness Jeannie Drake that ensures that commercial dashboards cannot enter the market until the MaPS dashboard has been up and running for at least one year.  As Baroness Altmann commented, “This will allow consumers to become used to the concept of dashboards, find their way around their pensions and have some guidance as to their possible options for the future. With the rise in numbers of people who may be tempted to cash in their pensions, or buy other financial products that might not be right for them, it is more important than ever to ensure their pension funds are better safeguarded.”

The Government was also defeated on an amendment that ensures any private commercially-run dashboards should not be allowed to carry out transactions without Parliament approving new regulations setting out how this should work.  Peers on all sides of the House were concerned that a privately-run dashboard that was ‘transactional’ could pave the way for transfers that may not be in people’s best interests, or enable the selling of inappropriate financial products.

What’s next?

The Bill will be introduced into the Commons on 7 October. We’ll be watching closely to see whether the Government chooses to retain this newly-won consumer protection or whether it uses its large majority to overturn it. We’ll keep you posted.

Read more

You can explore our briefing papers and consultation responses in the policy section of our media centre.