LONDON (Reuters) - Britain’s markets watchdog is sending supervisors to Wales to make sure that 15 billion pounds in steelworker pensions does not become a “honey pot” for crooks.
The move — made public at a parliamentary committee meeting on Wednesday — is part of a broader crackdown by the Financial Conduct Authority to avert pension scams across Britain following changes in the law.
Since 2015, Britain has made it possible for people to cash in their pension pots rather than waiting until retirement, resulting in people getting cold calls about taking the money.
Christopher Woolard, the FCA’s director of strategy and competition, was accused by MPs sounding a “tad complacent” about the potential for scams.
But quizzed by parliament’s Work and Pensions Select Committee, he sought to reassure the MPs the watchdog was taking action — including for the steelworkers’s pensions.
“We have got a programme of visiting advisers in the Port Talbot and Swansea areas to remind them of their requirements,” Woolard said.
Steelworkers there are being forced to choose between a new pension scheme and a pensions lifeboat, the Pension Protection Fund, following the closure of their 15 billion pounds pension scheme.
Pensions freedom also gives workers the option of cashing in their pensions.
Committee chair Frank Field said employees in general are worried about the future of their company and pension.
“Big pension schemes like British Steel are such a honey pot for crooks,” Field said.
In the run up to “pension freedom”, MPs warned that people would be tempted to blow the cash on a sports car, but Woolard said that 94 percent of the pots cashed in were not a person’s main retirement income.
Field was also worried that the public purse will come under pressure if people cash in pots and then rely on state benefits in their old age.
“If one gets this culture developing, we threaten something great about welfare,” he said.
Separately on Wednesday, Trevor Greetham, head of multi-asset at Royal London Asset Management, said pension freedom means people have to be stewards of their own investment risk at older ages.
“There is a risk that if people are not taking financial advice, they can end up investing in something quite risky,” Greetham told the Reuters Global 2018 Investment Outlook Summit.
But Woolard said most of the cash taken out of a pot was invested elsewhere rather than “blowing it”. A large number of people were cashing in without taking advice, but often the pots involved were small, he said.
The government has said it will ban “cold calling” in a bid to crack down on scams, and will present draft legislation next year, too slow for some MPs.
“It’s a question of understanding the complexities around that,” economic secretary Stephen Barclay told the committee.
“Addressing all cold calling is difficult, nigh on impossible, often it’s from offshore,” Barclay said.
“No one wants to see people ripped off of their life savings.”
People aged 55 or over are sent “wake up” packs with options for pensions, but Woolard said it would be more effective if this happened at 50 years of age.
There is already a draft amendment in the upper house that would require financial firms to refer people to a new financial guidance body, introducing a greater element of compulsion in advice.
Reporting by Huw Jones and Carolyn Cohn, editing by Jeremy Gaunt