By Ben Fairhead, Partner, and Nicola King, Solicitor, at Pinsent Masons
Pension scams consultation
Far and away the most significant development in the pension scams arena in the past 12 months has been the consultation launched by the DWP and HM Treasury in December.
This followed increasing momentum from industry and particularly groups like the Pension Liberation Industry Group during the summer and autumn of 2016 to press for changes to the law to tackle pension scams. This had been brought to the fore by the High Court decision in Hughes v Royal London, a decision that highlighted the limited scope available to challenge an individual's right to a statutory transfer even where concerns existed about the absence of an earning relationship between that individual and the intended receiving scheme's employer.
This was freely acknowledged by the government as a catalyst for seeking change, but sensibly the consultation has taken the opportunity to put forward a menu of options for dealing with the scourge of pension scams. Indeed, it is not a problem that lends itself to one solution.
Ban on cold calling
The headline grabber has been the proposed ban on cold calling, often seen as the origins of someone being lured into a pension scam. Whilst this would certainly create greater scope for taking action against scammers (and hopefully deterring them) through levying large fines, one of the greatest benefits would be sending a clear message to the public about the risks of cold calls.
The general consensus is that there is little objection to the principle of a ban, and there is some appetite for taking this further to include texts and emails. There seems to be limited drawback in bringing in a ban – but, equally, it should not be seen as a silver bullet: it will not affect calls from overseas and will only be effective to the extent the ban is well publicised and the warnings heeded.
Limiting the statutory right to transfer
This is the area of the consultation that has sparked the most debate amongst industry. There was, until the Hughes decision, some reluctance to tamper with the statutory right test. However, there has been an increasing sense of resignation to narrowing the right: the government's proposal is to bring in a requirement of a "genuine employment link" where the transfer is being made to an occupational pension scheme that is not an authorised master trust.
Responses have generally been supportive of the proposal albeit with some reservation expressed about the possibility of fake earnings being put into place by sophisticated fraudsters intent upon working around the rules. Provided though the bar is set reasonably high in order to show earnings are sufficiently regular and not trivial, it should deter all but the most hardened scammers.
Requirement of active company/changes to SSASs
Other proposed changes include requiring all new pension scheme registrations to be made through an active company and improving regulation of SSASs. These are also generally perceived to be inoffensive changes and ones that can help chip away at the problem, making it that bit more difficult for scammers.
Opposing views
Notwithstanding a general welcoming of the proposed changes, the PLSA has advanced a more ambitious proposal to introduce a new authorisation regime for workplace pension schemes. By its own admission though, such a system would require a significant new role for the Pensions Regulator and resulting cost – will there be any appetite for bringing that in during times of austerity?
For its part, the Regulator has ventured to propose an outright ban on SSASs, an idea that some in the industry have suggested overlooks the positive aspects of SSASs.
It remains to be seen how the government will navigate its way through the range of responses when it puts forward its proposals, which are promised very soon.
Looking forward
Questions remain about all of those who have already been "stung" – these changes will come too late to save them, yet they show a tacit recognition that the law has not offered sufficient protection against pension scams during the past five years or so.
That said, looking to the future positively, if the government moves ahead with its planned changes, those will – at least if adopted collectively – provide genuine scope for reducing significantly the influx of pension scams.
Somewhat ironically, the deadline for responses to the consultation (end of 13 February 2017) coincided perfectly with the fourth anniversary of the launch of the Regulator's campaign. We have come a long way during those four years, and it may well be that, come the fifth anniversary, we will finally have seen the scorpion starved of its prey.
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