Pensions cold calling must be banned next year to prevent people being “avoidably conned out of their life savings”, an influential committee of MPs has said.
The Work and Pensions Select Committee has warned the Government that the scale of the scamming is likely to be grossly underestimated by official reports.
It has urged the Government to fasttrack an existing plan to ban the practice and also to do more to ensure that people are given guidance before they decide to access their pension pot and invest the funds elsewhere.
The committee said the risks of being conned have increased since the Government reformed pensions in 2015 to give over-55s a wider range of choices over how they use the money they have saved.
The Government has already vowed to ban pensions cold calling but the committee has urged “urgent legislative action” to bring forward the crackdown.
Ministers recently unveiled the Financial Guidance and Claims Bill which would bring about the ban.
But the committee believes the draft legislation is flawed because it ties outlawing the calls to the creation of a new financial guidance body which could delay its implementation until 2020.
The committee wants an enforceable ban to be introduced by June 2018 at the latest and as a result is proposing changing the Bill.
Frank Field, the chairman of the committee, said pensions are “rich pickings” for scammers offering over-the-top returns and seemingly clever advice.
He said: “Every day that passes without a ban, people are being avoidably conned out of their life savings.
“There is no need to overcomplicate this: our proposal would see an enforceable ban in place by summer, closing at least one door on rafts of scammers at a stroke.”
Mr Field continued: “Making guidance the default option combined with the ban on cold calling would be a simple but big step forward in consumer protection in the era of pension freedoms.
“The Government should use the Bill that has just arrived in the Commons to legislate to protect pensions now .”
The Committee warned that the combination of high financial value and low saver engagement has made pensions a scammer’s “perfect storm” with MPs having heard examples of people being encouraged to invest in diamonds and speculative overseas property developments.
It said the problem of people being pushed towards “completely legal but totally inappropriate” investments which fall short of fraud needed to be tackled.
A Treasury spokeswoman said: “We take the threat of pension scams very seriously and we’re already protecting savers. “We’re bringing forward legislation to ban pensions cold calling, tightening HMRC (HM Revenue and Customs) rules to stop pensions scammers and fraudulent schemes, and preventing the transfer of money from occupational pension schemes into fraudulent ones.”
Yvonne Braun, director of policy, long-term savings and protection at the Association of British Insurers (ABI), said savers should seek “quality guidance” from the likes of Pension Wise and the Pensions Advisory Service, and advice from regulated financial advisers.
She said: “People’s life-savings must not be left vulnerable to scammers and con artists.
“With mortgages already protected by a cold-calling ban it is high time pensions were given the same level of protection.”