It’s time to think about ways to stop criminal networks from targeting cash-rich pensioners in Hong Kong
The UK has unveiled tighter rules to prevent cold calling of retirees who cash in their pensions
Hong Kong’s pension regulator should consider taking a cue from its British counterpart, which last week rolled out measures that ban unsolicited marketing of exotic investment opportunities over the phone to individuals that have recently cashed in their pensions.
Initially the ban will apply only to phone calls, but could be expanded to include text messages and emails. The ban will be enforced with fines of up to £500,000. The government will soon begin a consultation on whether the ban should be expanded to cover all forms of electronic devices.
About £19 million is lost annually to fraudsters, according to data from the Treasury.
The surge in fraudulent calls follows a change to pension rules a year ago, which allow pensioners to cash in their mandatory savings plans from the age of 55. The rule change was aimed at allowing more flexibility in their investment choices and to draw out some cash.
Herein is a possible lesson for Hong Kong’s Mandatory Provident Fund Schemes Authority to add more education or other campaigns to help protect savers from similar scams.
The MPF, which covers 2.8 million employees and self-employed individuals, allow retirees to draw out from the scheme at age 65. There is an option to draw from the scheme at an earlier time frame for those who choose to retire from age 60.
There are no restriction on how to use the funds once they are taken out of the MPF.
In the first half of this year, HK$2.83 billion was pulled out of the mandatory savings scheme, according to the MPFA statistics.
On average, each scheme member will have accumulated HK$144,000 by the end of this year.
This amount is attractive to scammers and it’s likely that we’ll be seeing an increase in fraud as the pension accounts grow in value.
The MPFA has done a lot of investment education to assist employees in how to invest their MPF assets. But so far, there little in the way of helping pensioners decide what to do with their money after withdrawing from the MPF.
So far we’ve encountered few of the fraudster problems affecting the UK, but it would be wise to take preventative action to guard against these risks.
Hong Kong securities law prohibits the sale of investment products via cold calling, which may explain why there are fewer scams targeting pensioners.
However, we have seen many telephone scams over the past year. One familiar con involves misleading the target to believe a family member has been kidnapped.
It’s not hard to imagine these telephone scams becoming more sophisticated schemes that target people who have just taken their money out of the MPF.
We should invest in public awareness of these potential scams.