As part of the consultation, the Treasury is looking at widening the definition of a pensions  scam from the current description of ‘attempts to release funds from HMRC registered pension schemes in an unauthorised way.’ In future, scams would encompass the marketing of products and arrangements and successful or unsuccessful attempts by a party (the ‘scammer’), where the scammer has misled the individual in relation to risks and appropriateness of such a move. 

This would include encouraging people to release funds from an HMRC registered pension scheme, resulting in a tax charge that is normally not anticipated by the member; persuading individuals over the age of 55 to flexibly access their pension savings in order to invest in inappropriate investments; and persuading individuals under 55 to transfer their pension savings in order to invest in inappropriate investments.

The government plans to give the Information Commissioner’s Office(ICO) the ability to use  existing enforcement powers to impose civil sanctions on firms located or operating in the UK who breach the ban, including the power to issue fines of up to £500,000.

The proposed ban is intended to catch various types of pension scams, including ‘free pension reviews’ and misleading offers of high return pension funds.

The consultation provides a list of the sorts of phone conversations that it intends to fall within  scope. They include offers of free financial advice or guidance; assessments of the performance of the individual’s current pension funds; inducements to hold certain investments within a pensions tax wrapper including overseas investments; promotions of retirement income products such as drawdown and annuity products; inducements to release pension funds early or transfer a pension fund; introductions to a firm dealing in pensions investments; and offers to assess charges on the pension.

The proposal is not intended to apply to legitimate interactions, including where consumers have expressly requested information from a firm, or asked to meet a financial advisor, or where an existing client relationship exists.

The consultation seeks feedback on whether the ban should be extended to all forms of electronic communication, including emails, and on how to raise consumer awareness of the issues.

It also wants views on proposals to limit the statutory right to transfer to some occupational pension schemes, so that firms and trustees can block pension transfers when there are concerns over the legitimacy of the receiving vehicle.

Under this proposal, a statutory right to a transfer would exist only where the receiving scheme is a personal pension scheme operated by a Financial Conduct Authority (FCA) authorised firm or entity; there is a genuine employment link to the receiving occupational pension scheme; or the receiving occupational pension scheme was an authorised master trust.

Recognising that blocking transfers is a ‘challenging’ proposition, the consultation suggests an alternative which would be to require ‘insistent’ scheme members (who wish to continue with the transfer, despite being warned of the risks) to sign a declaration similar to the example ‘discharge letter’ in the Industry code of practice on combating pension scams.

Finally, the consultation looks at single-member occupation pension schemes that currently require no registration with The Pensions Regulator, and can be set up using a dormant company as the sponsoring employer. It argues they are therefore an easy way for fraudsters to register a pension scheme with HMRC, and says this is particularly an issue in relation to Small Self-Administered Schemes (SSASs). One proposal here is to make it a requirement that only active companies can register a pension scheme.

The consultation closes on 13 February 2017.

The Treasury & DWP pensions scams consultation is here