The Privacy and Electronic Communications (Amendment) (No.2) Regulations (the Regulations) came into force on 9 January 2019 with the effect of banning cold calls in relation to pensions.
The long awaited ban covers unsolicited calls, emails and text messages about pensions. The Regulations will be enforced by the Information Commissioner's Office (ICO), with the power to impose fines of up to £500,000 on organisations in breach of the Regulations.
Why have the changes been introduced?
Cold-calling in relation to pensions is an increasingly prevalent practice affecting pension scheme members. The method of communication is commonly used by scammers, as pension scheme members are unable to differentiate between legitimate and scam calls. Citizens Advice estimates that approximately 10.9 million unsolicited pension calls and messages have been received by pension scheme members since 2015. Similarly, in recent statistics published by the Financial Conduct Authority (FCA) it was shown that during 2017, pension scam victims lost on average £91,000 each.
Industry bodies have lobbied the government for many years to bring the pensions industry in line with other financial products, such as mortgages, where a ban on cold-calling was introduced as early as 2004.
The pensions cold-calling ban was first announced in August 2017 following HM Treasury’s open consultation on pension scams published on 5 December 2016. The government introduced new amendments into the Financial Guidance and Claims Act 2018 to regulate against cold-calling in relation to pension schemes. The Financial Guidance and Claims Act 2018 received royal assent in May 2018, however, implementation of the ban was pushed back while HM Treasury consulted further and the Regulations were finalised in late 2018.
What are the key changes?
The Regulations introduce a ban which prohibits cold-calling in relation to pensions, except where:
- The caller is authorised by the FCA, or is the trustee or manager of an occupational or personal pension scheme, and
- The recipient of the call consents to the calls from the caller; or
- The recipient of the call is an existing customer of the organisation making the call, and the recipient expects to receive pension cold calls from that organisation and has been given the opportunity to opt out of receiving such calls.
Failure to adhere to the regulations could result in the ICO issuing non-compliant organisations with fines of up to £500,000. In addition to this, the organisation may also be liable to pay compensation to the victim of the cold call.
Response to the Changes
The impact and success of the ban on cold-calling in relation to pensions remains to be seen, however it is recognised that the Regulations are unlikely to deter all pension fraudsters. In this vein, raising awareness of the ban on cold calls could help further reduce the power of fraudsters in this area by equipping pension scheme members with an awareness of the key indicators of a scam. In addition a public awareness campaign will be vital to fully inform the public of the changes. For trustees and others involved in running workplace pension schemes an important tip is to ensure they send members the Pensions Regulator’s latest anti-scam awareness raising materials as part of their regular communication strategy. This means they or the scheme’s administrators will need to visit the Regulator’s site regularly to ensure the materials they are using are the latest.
The government's consultation response published in October 2018 confirmed that it was committed to identifying and implementing new legislation to enable trustees of transferring schemes to ensure the safety and security of the member’s pension savings. The government is yet to issue guidance for pension scheme trustees dealing with transfer requests, where the pension scheme member wishes to proceed, but the trustees raise concerns about the validity of the transferee scheme and the security of the member's pension savings. As such, further developments in this area are anticipated.