Today saw the introduction of a cold calling ban in relation to pensions (as outlined at www.bbc.co.uk/news/business-46799038)
Pension cold calling has been common place for a number of years: prior to the introduction of pension freedoms in 2015 this invariably focused on ‘pension unlocking’ – where people were offered the ability to ‘cash in’ their pension or to get ‘cash back’ – typically using weird and wonderful investments whilst being unaware of the significant tax penalties in doing so.
Since pension freedoms came into effect in 2015, assets in pensions haven’t needed to be ‘unlocked’ for the sums involved to be accessed and therefore attention seems to have turned to using the funds to invest in similar weird and wonderful (typically unregulated) investments and whilst the tax penalties may not apply, the risk of losses and fraud do.
Given that the majority of regulated financial advisers would not use unregulated investments, investors are typically introduced to such investments via unregulated advisers who use cold calling to engage with potential ‘investors’.
There are many examples of investors losing their funds either due to fraud or because the investments have not behaved as expected.
This legislation therefore serves to draw a line in the sand whereby making a cold call is now an offence and potentially subject to a £500,000 fine.
As Tom Selby (AJ Bell) states in the BBC article “Prohibiting cold-calling is only part of the solution and will by no means eradicate the threat of scam activity altogether. Pensions remain a juicy target for fraudsters and some will inevitably look to circumvent the ban or simply ignore it altogether.” He goes on to suggest “anyone who (receives) a call out of the blue about pensions to simply hang up the phone.”
Whilst this therefore may not be sufficient deterrent for those who are engaged in any fraudulent activity, it will hopefully enable investors to realise that if they are ‘cold called’, rules are being breached and therefore they are hopefully wary and on guard and that ‘hanging up’ may well be sensible.
Article written by Paul Stocks (@paul_stocks_ifa), Financial Services Director and Independent Financial Adviser