Pension scammers make off with nearly £500m

A relaxation of the rules will lead to a rise in fraudsters taking advantage of customer confusion

People must resist the temptation to break into their pension before retirement (Getty Creative)

Almost half a billion pounds has been lost by unsuspecting victims of pension scams. The problem is becoming so severe that the Pensions Regulator has launched a new campaign to warn people of the risk of losing all their retirement savings.

The total lost to crooks conning people out of their pension pots could actually be much higher than the £495m estimated as many of the crimes go unreported, experts warn.

The scam is simple. Unscrupulous firms claim that you can unlock your pension early, before you reach 55. But they don’t tell you that if you do so, you risk losing up to 70 per cent of your savings through tax losses.

They use jargon to fool you into believing they are genuine, but they’re not. Some suggest that you use “legal loopholes” to move your pension pot into bogus investments that could even result in you losing your entire savings.

Home visits from self-proclaimed “introducers”, offers of “free pension reviews”, claims about unusual investments like overseas property, storage units or biofuels are all used to fool members into thinking they’re being offered a legitimate pension transfer.

For example, they may suggest you transfer your pension pot into a company listed on a stock exchange that you know nothing about. Other dodgy deals involve your savings being lent to other pension savers or being used in some sort of commercial lending business. But none are legitimate.

Being tempted by the crook’s patter can be disastrous. One woman, whose 40-year-old son took his own life after never receiving a promised £17,000 lump sum following the transfer of his £42,000 work pension, said: “I don’t want other mothers to suffer what I’ve been through, and what my family has been through.

“No matter how desperate things get, don’t be tempted to cash in your pension. The people behind these scams are rogues who exploit people’s vulnerabilities.”

Another 49-year-old scam victim, who is facing an £18,000 tax bill and risks losing her home after falling victim to a “pension loan” scam said: “These scams target vulnerable people. I feel very angry that I have been misled. Ignore the sales patter, ignore the glossy websites, ignore the cold calls and text messages. Go to an independent financial adviser – speak to an expert.”

Andrew Warwick-Thompson, of the Pensions Regulator, said: “We have seen victims lose their entire pension savings by signing up to these offers. If you are approached by someone claiming to offer advice or that they can help you move a frozen pension, don’t get suckered.

“You could be left with nothing for retirement, you will not be compensated, and you may have to pay fees and a high tax charge. The only people who benefit financially from the arrangements are the scammers themselves.”

With new relaxed pension rules coming in next April, scammers are likely to increase their activities to take advantage of consumer confusion, warned Duncan Buchanan of the Society of Pension Consultants. “Regulators need to be alive to the fact that we will see many more real-life examples of people being encouraged to invest their retirement funds in mirage investments that soon disappear.”

Michelle Cracknell, of the Pensions Advisory Service, said: “We worry that many people who fall for these scams do not ask for help due to embarrassment. We would urge anyone that has any doubt about what they are hearing or what they have done to contact us.”

For information, go to pension-scams.com. For help, call the Pensions Advisory Service at 0845 6012923 or at thepensionsadvisoryservice.org.uk. Report a pensions scam to Action Fraud on 0300 123 2040 or actionfraud.police.uk