Below are RMT Group’s answers to the UK’s government open consultation on the proposal by the UK government to reduce pensions scams by banning pension cold calling.
Does the definition in 2.1 above capture the key areas of consumer detriment caused by pension scam activity?
Yes it does.
Are there any other factors that should be considered as signs of a scam?
Yes when ‘introducers’ are involved and multiple financial advisors are involved. Typically the introducer will work with a ‘panel of financial advisors’ where one financial advisor would be used to open a SIPP on an execution only basis. A second financial advisor will then advise on the suitability of investments based on the clients circumstances and attitude to risk. Typically 75% of these funds will go into a ‘vanilla’ type investment but 25% will go into something very risky such as a small cap stock or alternative investment fund that has huge spreads or a very high commission. A 50% spread or commission on this part of the investment could give rise to an overall 12.5% commission being 4 times greater than a financial advisor would normally charge. That’s nearly £6,000 earned on a average pension pot of £46,000.
When the caller appears to be directly or indirectly representing the FCA or a government or legislative body.
In your experience, how are consumers affected by cold calling about pensions? Do any consumers benefit from cold calling about pensions?
We run a call centre booking pension appointments for around 25 different financial advice firms. This involves making thousands of calls per week. Most calls are ended within 10-15 seconds, but a significant number of our cold calls are above 2 minutes (8.61%), some co-ordinators have up to 20%. Once the prospect starts talking and they have a pension that qualifies it is an extremely positive experience as the vast majority of people are confused and do not understand their pensions want to know more.
At this level we find that the vast majority of people that we speak to are confused about their pension situation. If it is established that the prospect has a qualifying pension, their experience with us becomes extremely positive and generally there is a need to understand their options both now and in the future. This is particularly relevant when the possibility of over-charging on annual management fees may have taken place and the new flexible options and taxation issues, which were introduced in April 2015. Our call highlights these important issues but the final decision to act, remains with the prospect.
Since 2013 we have arranged nearly 3,000 appointments for people who were mainly unaware of how these important issues may impact on their pension in retirement. Our conversion rates are very high at 70% and we encourage people to leave reviews on eKomi. This provides a measure by which we can check that no high pressure or mis-selling occurs. Here are some of our reviews relating to the quality of service provided by ourselves and our financial advisors.
“The initial contact call was very gentle and not pushy whatsoever. *** was very courteous and professional.”
“Although this was a ‘cold call’ I found the consultant very helpful and I did not feel under any pressure to accept the
“The initial introduction and communications up to the meeting were first class. Appointment went very smoothly and now await the findings with baited breath!!”
“Don’t usually respond to telephone canvassers. But all very professional . The Ida who turned up very genuine & straight forward . I would defiantly recommend”
Do you agree that the scope of the ban should include the actions set out in paragraph 3.5 above? Are there any other activities that should fall within the scope of the proposed ban on pensions cold calling?
As copied from paragraph 3.5:
offers of a ‘free pension review’, or other free financial advice or guidance – Yes
assessments of the performance of the individual’s current pension funds – Yes
inducements to hold certain investments within a pensions tax wrapper including overseas investments – No, as this is advice
promotions of retirement income products such as drawdown and annuity products – No, as this is advice
inducements to release pension funds early – No
inducements to release funds from a pension and transfer them into a bank account – No
inducement to transfer a pension fund – No
introductions to a firm dealing in pensions investments – No
offers to assess charges on the pension – Yes
If you are to ban pension cold calling the ban should only affect cold callers not representing fully regulated advisor firms.
Do you agree that existing client relationships and express requests should be excluded from the proposed ban?
Yes, otherwise how will they communicate?
What would the costs and benefits be of extending the proposed ban to include all electronic communications?
We do not text or email prospects so I cannot comment.
How can the government best maintain the clarity of existing PECR concepts in light of the proposed ban on pensions cold calling?
How else can the government best ensure consumers are aware of the ban?
We do not think that cold calling should be banned. However, if you did ban it you would need constant advertising to warn the general public as the general public have a very short memory and so with no constant advertising it would ironically be easier for the scam companies as they would now be operating in a vacuum and they are certainly not concerned about the £500,000 fine as they are breaking the law anyway. Money would be better spent on educating the general public of the benefits of seeing a financial advisor post RDR and educating persons to make sure that person is on the financial services register. Lots of legitimate companies use cold calling and by peddling the current view as published in the Daily Mail or the Express that “if someone contacts you out of the blue about your pension they are criminals and are breaking the law” means that legitimate companies have to make more calls.
Do you have any views on enforcement mechanism set out in paragraphs 3.10 above?
£500,000 fine is more than enough for our firm to quit this market. But a scam company will not be deterred as its already committing fraud or partaking in it so what will the fine do when they already run the risk of going to prison? It certainly won’t stop them. But it will cripple companies like our own and create a larger space for the scam companies to operate in.
Is there any reason why legitimate firms’ business models should be affected as a result of the ban?
Yes, a ban on cold calling would mean a greater reliance on online lead generation. Online lead generation has a ceiling on the number of leads generated determined by the number of searches made for financial advice. This would not be able to satisfy the demand of 20,000 financial advisors and their requirements for new prospects.
This would further reduce the number of financial advisors operating in the UK as they would struggle to generate new prospects.
We supply appointments to around 25 regulated financial advice firms who rely on appointment setting to bring in new business.
Over the past 4 years it has been more and more difficult to generate appointments due to the negative image portrayed by the media that cold calling is a scam. The price of our appointments has steadily increased from £225 to £390 due to the increased degree of difficulty. We could generate 10 times the volume and still have no problem placing or selling the appointments.
Do you have any other views or information the government should consider in relation to the proposed ban on cold calling in relation to pensions?
97% of pension scams started as a cold call. But what is the percentage of scam pension calls v legitimate pension calls. I think this has declined already over the past 18 months due to tightening of the SIPP companies on what they accept as an investment. This could be completely irradiated if the regulators simply made it impossible to transfer a pension into an illegitimate investment. We used to get 3 or 4 a month and now it’s very rare. I think a lot of the scam companies have already stopped trading. The next step is to prevent transfers into rogue occupational schemes to finish it once and for all. The answer is not to stop cold calls.
Would it not be better to fine the pension companies £500,000 for allowing a transfer of a pension into a illegitimate scheme, after all they are the custodians of the persons pension.
Our firm is #1 on Google for the word pension lead and as a result we receive around 3-400 enquiries per year from financial advisors. Around 60% of the enquiries are for appointments and not online leads. This is because they are superior in quality and performance and this enables the financial advisor to focus on giving advice.
Do you agree with the proposal to limit the statutory right to transfer in this way, or should this be further limited? If so, in what way and why?
No, everyone should have the right, after all it’s their money. What about placing the responsibility on the pension company to be liable for transferring into a rogue scheme.
Would a requirement to evidence a regular earnings link act as a major deterrent to prevent fraud? How could the requirements be circumvented?
Yes almost certainly.
How might an earnings and employment link be implemented? Should the onus be on the scheme member to provide proof of earnings?
Not sure of the Data Protection problems but a list of employees and contributions should be made available to the pension company transferring from. Yes.
What would be the impact and cost to trustees / managers / firms?
Statutory obligation should be introduced that would be required by law, that the scheme trustees / managers / firms had a duty of care to ensure that the pension rights of the individual are protected from fraudulent activity.
Under the proposals, how would the process for ‘non-statutory’ transfers change for trustees or managers? What would they need to do differently from the current situation?
What are the pros and cons of introducing a statutory discharge form for insistent clients? How effective would this be as a means of combating scams?
But if the liability is with the pension company to not transfer (as they would effectively be the custodian of the pension scheme) then it cannot be transferred however insistent.
How could it be ensured that a statutory discharge of responsibility did not reduce the requirement on firms and trustees to undertake due diligence?
A £500,000 fine?
What are your views on a ‘cooling-off period’ for pension transfers? Do you have any evidence of how this could help to combat pension scams?
Probably would not work as the scam company would return the funds within the cooling period to avoid be flagged as suspect scheme.
What additional measures or safeguards could be put in place to ensure that trustees or managers appropriately handle transfers that do not meet the new proposed statutory requirements?
That the funds are protected under the Financial Services Compensation Scheme in the event of fraudulent transfers.
Are there other potential risks that this proposal might present? Do you have any suggestions as to how these risks might be mitigated?
The responsibility of the transfer of pensions should be with the pension companies and scheme trustees.
Do you agree that new pension scheme registrations should be required to be made through an active company? If no, what are the legitimate circumstances in which a dormant company might want to register a new pension scheme?
Yes and none.
Are there any further actions that the government should consider to prevent SSASs being used as vehicles for pension scams?
A blanket ban on SSASs would result in no need to transfer into an OPS. The only monies that pass into a OPS should be monthly pension contributions.