The pension freedoms launched in April have proved popular with people aged 55 and over. At last they’re able to gain access to their retirement savings and do what they like with their money.
But they’ve proved to be even more of an opportunity for crooks. Four months after the reforms came into effect, new evidence from Citizens Advice reveals that many people are being repeatedly targeted with pension frauds.
Two out of five staff at the debt charity report having seen people on the receiving end of scams more than once, while a further one in 10 helping with the Government’s Pension Wise service have seen people who had either responded or fallen prey to a scam.
The figures confirm that opportunistic fraudsters are cashing in on the freedoms and finding new ways to go after people’s pension pots. Typical tricks include offering “free” pension reviews and promising to invest in funds that don’t necessarily exist.
Gillian Guy, chief executive of Citizens Advice, said: “Pension and investment scams are particularly dangerous as they can destroy people’s entire pension pot, leaving them with little or no savings for retirement.”
After being offered a free pension review, one potential fraud victim was visited at work by a bogus independent financial adviser who offered the chance of investing in overseas property.
“He was armed with a glossy, legitimate-looking brochure, and said my money would be invested in a fund registered offshore,” the potential victim explained. Paperwork was couriered to him asking him to sign an agreement to transfer his savings.
“I felt uncomfortable and decided it was too much of a risk. I feel lucky, though – on another day I could have easily signed those forms.”
He was indeed lucky. He nearly lost his entire £90,000 pension pot to the dodgy scheme. Others have been less fortunate: losses from pension liberation fraud climbed to £4.7m in May, according to Action Fraud, up 300 per cent from just £1.5m in April.
The pensions minister Ros Altmann said: “If you receive emails or junk mail with promises of ‘get rich quick’ schemes, chuck them in the bin. And if you get cold-called by someone offering a pension review or help to trace a lost pension, hang up because the chances are it’s a scam.”
The economic secretary to the Treasury, Harriett Baldwin, said: “If you are in any doubt about how to spot a scammer, or want to talk through your retirement options, I urge you to visit the Pension Wise website or book a free telephone or face-to-face guidance session.”
Meanwhile, it appears that those who are avoiding scammers but taking advantage of the new pension freedoms are being sensible with their retirement savings. Almost a third of those cashing in their pension pots are using the money to pay off debt.
A survey by the fund manager Fidelity, published this week, suggests 29 per cent of people taking advantage of the freeedoms have done so to reduce their debt – with just 3 per cent using the cash to buy a new car. Meanwhile, one in five respondents said they planned to reinvest the money.
The new scams seen by Citizens Advice
Unspecified financial products: People are asked by fraudsters to give them access to their pension pots, which they would then invest in financial products on their behalf. Despite offering a high rate of return, scammers were unable to explain what the investments might be.
Free pension reviews: People are texted or cold-called with offers of a free pension review. The caller then asks to visit the person in their own home, bringing paperwork that would allow them to get access to their pension details. One man responded to an internet ad for a free pension review, filled in his details, and was visited by someone claiming to be an independent financial adviser – who couldn’t describe any investments.
Investments for pension cash: People are approached with offers to invest their pension cash in products such as property overseas or fine wines. One investment scam featured two salesmen – one who visited the potential customer to get access to his pension details, and a second to encourage him to invest his pension and any other savings in property in South Africa.
five-point plan beat the fraudsters
1. Never be rushed into a decision. If a salesperson says an offer is only available for a short time, that’s a good sign that it may be a scam.
2. Check if the firm contacting you is regulated by either the Financial Conduct Authority or the Pensions Regulator.
3. If you are unsure about an approach you’ve had, contact the Pensions Advisory Service on 0300 123 1047, or Citizens Advice on 03454 04 05 06.
4. Check out the FCA’s Scamsmart warning list, giving the names of investment schemes that are known scams. You’ll find it online at fca.org.uk/scamsmart.
5. If you have accepted an offer you think is a scam, report it to Action Fraud on 0300 123 2040. For further information on pension scams, visit pensionwise.gov.uk.