The select committee’s report into its inquiry into priorities for the forthcoming financial guidance and claims bill tackling pension scams said: ‘The combination of high financial value and low saver engagement has made pensions a scammer's “perfect storm”.

‘Archetypal inappropriate investments are high risk, highly illiquid (once money is invested it is very difficult to retrieve) and unregulated – the committee heard of examples like schemes to invest in "diamonds, overseas property developments, store pods, forestry and film".’

MPs said estimates of the scale of scamming vary hugely but warn it is likely grossly underestimated by official reports and the full scale may not be apparent for many years.

The committee says the evolving kind of pension scam that falls short of fraud – pushing people toward ‘completely legal but totally inappropriate’ investments - needs to be tackled. As a first step, it wants the government to take urgent action through the financial guidance and claims bill which is currently going through Parliament.

On the topic of cold calls, which the inquiry identified as the leading driver of pension scams, the committee is calling for a new clause in the bill requiring the government to introduce a ban by June 2018 at the latest.

Current provisions in the bill tie that ban to the establishment of a new financial guidance body, which the committee says could delay the ban until 2020. By setting the details by regulations, the government will allow outstanding issues to be resolved without being tied to a lengthy parliamentary process, and will have the ability to adapt the ban as scams evolve.

The committee also wants clause 5(2) of the bill strengthened to create a ‘guidance by default’ provision that ensures an individual either receives or expressly refuses guidance before being granted access to a pension pot. The details should be set out in Financial Conduct Authority rules, following public consultation. The government should use its existing powers to place equivalent requirements on trust-based defined contribution pension schemes.

MPs argue that guidance by default would promote shopping around, better-informed decisions and protection against scams.

Frank Field, chair of the committee, 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.

‘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.’

Later this week the work and pension committee is set to hear evidence on the British Steel pension scheme, which the chair has described as a ‘honeypot for scammers’.

Yvonne Braun, director of policy, long-term savings and protection, at the Association of British Insurers (ABI), 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. Further measures to prevent fraudsters switching to spam emails and texts will also be important.

‘Savers need to be clear that any unsolicited contact about their pension is not to be trusted – they should instead seek quality guidance from PensionWise and The Pensions Advisory Service, and advice from regulated financial advisers.’

Protecting pensions against scams: priorities for the Financial Guidance and Claims Bill is here.

Report by Pat Sweet