The City watchdog was the latest organisation to warn this week of pension scams. With the new pension freedoms coming in on 6 April, the Financial Conduct Authority (FCA) said people need to watch out for scammers trying to trick you into investing your retirement savings in questionable schemes.
Scammers tend to ring out of the blue, so don't listen to cold-callers, the FCA advises. Chief executive Martin Wheatley says: "If you get cold-called about an investment opportunity, hang up. People need to be aware of the dangers of scammers offering opportunities that are too good to be true."
Research by Old Mutual suggests that around 15 per cent of over-55s have been targeted over the past year by cold-callers offering a "pension review". "The new pension freedoms will signal open season for scammers," warned Adrian Walker at the investment firm.
"With the new freedoms will come an army of people looking to take advantage of you and steal your money," Alan Higham, pensions expert at Fidelity Worldwide Investment told me when I interviewed him this week.
Some 5 million people will be targeted by crooks, he predicts. They are those aged 55 or over who have yet to touch their pension pots and who will be allowed to do what they want with their retirement savings from the beginning of the new tax year.
How will the fraudsters work? "You'll be getting text messages, cold-calls or emails offering, maybe, a pension review," Mr Higham explains.
"But you should ignore spam texts or cold-calls and go to the Government's Pension Wise service."
There's more advice from Mr Higham – who also explains how you can avoid losing a lot of your pension cash to the tax authorities – in a new video I've made with him. You can watch this at ind.pn/1xC7I7y.
Loophole closes on pension freedom and welfare payments Yesterday the Department for Work and Pensions (DWP) issued a factsheet highlighting the qualification rules for means-tested welfare payments in the context of the new pension freedoms. In short, it warned that anyone on benefits could face problems if they choose to take all the cash out of their pension pot.
I wrote recently about the risk of people spending all their retirement savings – or cashing in their annuity when new rules allowing them do so come into force in April 2016. I pointed it that it could lead to a spate of people simply spending the money on holidays, or passing it on to their children, and then falling back on the state to support them.
One reader – Peter from Liverpool – had phoned me to raise the issue, pointing out that from next year he could cash in his small annuity and have the income replaced through pension credits.
Now it looks as if the DWP will close the particular loophole. Under the so-called "deprivation rule", if you spend, transfer or give away any money that you take from your pension pot, the DWP will consider whether you have deliberately deprived yourself of that money in order to secure (or increase) your entitlement to benefits.
If it is decided that you have deliberately deprived yourself, you will be treated as still having that money and it will be taken into account as income or capital when your benefit entitlement is worked out. In other words, welfare payments will be cut.
Tom McPhail, head of pensions research at the adviser Hargreaves Lansdown, said: "There is a risk if too many people with modest private savings spend all their money, the DWP could end up with a spiralling welfare liability. The new freedoms are going to be very popular, but pension investors still need to take measured and well-informed decisions about how they use their retirement savings."
The guidance suggests that eligibility for a range of welfare payments could be affected by private savings, including housing benefit, Jobseeker's Allowance, income support and pension credit.
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