Lessons should be learned from the way the pension freedoms which allow over-55s to unlock their savings pots more easily were implemented, a City regulator boss has said.
Charles Randell, who chairs the Financial Conduct Authority (FCA), said a “large number” of people may have been tricked into transferring money to fraudsters or had bad advice to switch to poor value investments.
The pension freedoms launched in 2015 were implemented “relatively soon” after being unveiled, Mr Randell said.
He said such a major policy change “needs a substantial period of planning and testing” – to make sure safeguards are in place before launch.
All policymakers, including the FCA, need to learn lessons for the future, Mr Randell said.
A pensions cold calling ban came into force earlier this year – around four years after the pension freedoms were first introduced.
Cold calling has been a common tactic used by fraudsters trying to steal life savings as well as organisations persuading people to put their money in unsuitable high-risk schemes.
Previous FCA research suggests five million people across the UK could be at risk of falling for the common tactics used by pension scammers.
Mr Randell said: “The moral difference between unscrupulous and exploitative financial firms and financial criminals – between the skimmers and scammers – is, in my opinion, only one of degree.
“The FCA must be ready to use all the tools it has against both, including criminal prosecutions where appropriate, and to use them quickly and robustly.”
Mr Randell said some pension scheme members have been persuaded to make poor decisions when exercising their new-found freedoms to transfer out of a defined benefit (DB) scheme, which promises savers a certain level of retirement income.
He said: “We don’t know exactly how many people have been scammed into transferring their pension pots to fraudsters, or skimmed by bad advice to switch to inappropriate high-risk or poor value investments, but it’s clear that it could be a large number.”
In his speech, given to the the Cambridge Economic Crime Symposium on Wednesday, Mr Randell said: “I don’t express a view on the wisdom of the pension freedom policy as such.
“But the House of Commons Work and Pensions Committee has asked challenging questions about the execution of this policy.
“It was implemented in 2015, relatively soon after it was announced in 2014, but responses to the risk of skimming and scamming are continuing to be developed.
“For example, a ban on cold calling became effective at the beginning of 2019 and the FCA proposes to ban contingent charging for pension transfer advice from next year.”
Mr Randell continued: “All policymakers, including the FCA, need to learn lessons for the future from this experience.
“One of which is that a very major change of policy like this needs a substantial period of planning and testing so that all the necessary safeguards against skimming and scamming are integrated before it is launched.”
Mr Randell said although reports of pension scams are now decreasing, reports of other investment scams – such as cryptocurrency and forex (foreign exchange) investment scams – are rapidly increasing.
Speaking about the role of technology giants in combating fraud, Mr Randell said: “I wouldn’t support imposing unreasonable expectations on the big tech companies, but as a minimum I would expect them to take down suspected fraudulent content immediately when requested to do so by the authorities, and ensure that their terms and conditions give them the right to do so.
“And I would expect them to use their extraordinary resources to work with law enforcement and regulators to develop algorithms and machine learning tools to identify potentially fraudulent content.”