Out-Law News 2 min. read
19 May 2015, 11:02 am
However Steve Eckersley, the ICO's head of enforcement, told Radio 4's Money Box programme that the watchdog had been prepared for the number of unlawful calls about pensions to increase following the new flexibilities introduced last month. The ICO now also has stronger powers to fine companies for breaches of the Data Protection Act (DPA) and the Privacy and Electronic Communication Regulations (PECR), he said.
"We're hoping it won't match the scale of the calls made in relation to PPI [payment protection insurance]," he told the programme.
He said that part of the problem was because some companies were not clear enough about who they were sharing information with. Consumers often agreed to companies sharing information with "affiliated members or third parties", but those companies often had no obvious financial services connection, he said.
The ICO can fine companies up to £500,000 for serious breaches of the PECR. Previously it had to prove that unsolicited calls or texts caused "substantial damage or substantial distress" before it could issue a fine but, since last month, it need now only prove that the company was committing a serious breach of the law.
Pension litigation expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law.com, said that the figures appeared to suggest that "the fears about fraudsters targeting those approaching, or over, age 55 were well-founded".
"It no doubt remains relatively straightforward to obtain information to enable that sort of targeting and, with an enticing enough offer, there are bound to be plenty of people who will be lured into moving their pensions into the hands of the latest scammers," he said. "We could see a repeat performance of the sort of cold calling approach that has led to so many people entering into pension liberation vehicles over the past few years."
As of last month, members of defined contribution (DC) pension schemes have had more flexibility about how they access their savings once they turn 55. The Pensions Regulator and financial watchdogs have warned that this change could encourage scammers to contact people approaching 55, seeking to exploit their interest in the change in the law.
Scammers have traditionally marketed so-called pension 'liberation' arrangements, which claim to allow people access to their pension schemes before reaching the age of 55 by transferring their savings into unregulated, exotic investments. However, Fairhead said that scams were likely to evolve to keep up with the changes, perhaps by encouraging scheme members to transfer to new schemes allegedly allowing them access to flexibilities that their own occupational scheme may not yet be able to provide.
"It is still early days since the new changes came into effect, but a concerted effort will be required from the regulatory bodies and Pension Wise to ensure those heading towards retirement are on red alert and do not get caught out," he said.
"Similarly, to the extent that scams might be facilitated through transfers first being made out of an existing 'legitimate' scheme into something purporting to offer the new flexibilities, trustees and providers tasked with considering transfers will need to continue being vigilant and take heed of the sort of warning signs already well known to the industry. It will though be much more difficult for providers to intervene where individuals simply take advantage of drawdown from their own products with the intention of then apparently 'investing' the money in an opportunity presented by one of these scammers," he said.
Pension Wise is a government-backed service providing free and impartial guidance to pension savers at the point of retirement. Financial regulators have also produced new guidance for scheme trustees and consumers alerting them to the danger of pension scams, and encouraging scheme trustees to conduct "proper due diligence" on schemes that their members wish to transfer into. However, trustees do not have a duty to block "inappropriate" transfers.