Philip Hammond used today’s Autumn Statement to announce a ban on pension cold calls.
The plans are designed to stop scammers from calling people out of the blue and offering potential victims a free review of their pensions, extra tax savings, or access to their pension before the age of 55.
Hammond said that the government will shortly publish a consultation on options to tackle pension scams, with a view to giving firms greater powers to block suspicious transfers and making it harder for scammers to abuse ‘small self-administered schemes’.
The scale of pension scams
Fraudsters using cold calls often talk about ‘unique investment opportunities’, such as putting retirement money into investments in exotic locations or into ‘ethical’ projects that promise attractive returns.
The pension freedoms launched in 2015, which give over-55s more choice over how they use their retirement savings, have provided further opportunities for scammers to target people looking for early pension release.
Government statistics show that the scale of the problem is huge, with 250 million scam calls – the equivalent of eight a second – made in the UK every year.
An estimated 11 million pensioners are being targeted annually by cold callers according to research carried out by Citizens Advice in March 2016.
Pensioners are thought to have lost almost £19m to pension scams between April 2015 and March 2016. As well as losing their life savings, victims can also face hefty tax charges.
Which? welcomes the announcement
Vickie Sheriff, Which? Director of Campaigns and Communications, said: ‘Pension scams are a worrying problem and are costing savers millions of pounds.
‘The Chancellor’s announcement of plans to crack down on pensions cold calling is a victory against criminals who will always find ways to try to target even the savviest people.
‘No legitimate pension or investment firm will ever cold call you about releasing cash from your pension, accessing it before you are 55 or extra tax savings, so alarm bells should ring if they do.’
There will be a consultation on the proposals before the end of the year and the next steps are likely to be announced in the Budget in 2017.
Cut in Money Purchase Annual Allowance
In other pensions news, the Money Purchase Annual Allowance (MPPA) will be reduced to £4,000 from April 2017. The allowance of £10,000 in respect of money purchase pension contributions was originally introduced in April 2015 and applies to individuals who have flexibly accessed their pension benefits (via drawdown or accessing a lump sum).
HMRC introduced the MPAA to ensure that individuals can’t claim further tax relief on any new contributions made after taking their pension benefits under the pension freedoms.