The latest data from Citizens Advice shows that fraudsters are bombarding the over-55's with cold calls and emails in a bid to cheat them out of their retirement savings in the wake of new pension ‘freedoms’. In the four months since the pension reforms took effect, two in five members of their staff helping to offer the Government's new Pension Wise guidance service have seen people repeatedly targeted with pension scams. A further one in 10 had seen people who had either responded to or fallen prey to a scam.
Investment scams were targeting the cash lump sums people can release from their pension pots. This applies to defined contribution schemes, although defined benefit scheme members have been encouraged to consider transferring their pension to much worse DC schemes so that they can access large lump sums. This will incur high charges and has tax implications.
Scam victims include a Citizens Advice client in from the south of Scotland who was worried she lost her pension of around £110,000 after moving the pension to an unauthorised firm through a cold call last year. When she spoke to the caller they guaranteed a much better annual return on her pension pot up to her retirement date in a few years’ time and early release for some of the money this year. She has had very little information from the firm and now the website is no longer active and their phone line does not connect.
Douglas Baillie, a Perth-based independent financial adviser said his regulated firm had seen inquiries rise by up to 20 percent; ”There is a massive dichotomy that's emerged between the regulator endeavouring to control advice in these areas and the Treasury endeavouring to deliver government policy on freedoms."
A Government attempt to clamp down on the fraudsters through a task force named Project Bloom has so far resulted in 15 scam websites being shut down and several police raids. The National Crime Agency has also bought up 70 website domain names to prevent them from being bought up by criminals, and the Pensions Regulator is also investigating nine cases of suspected pension scams. The Pensions Regulator advises that some of the tactics used by pension scammers include offering free pension reviews, health checks and promises of better returns on their savings, pension loans, upfront cash or other promotions to tempt them. Most of these are bogus. The regulator has published advice for advisors and pension trustees.
Gillian Guy, chief executive of Citizens Advice, said: "Opportunistic fraudsters are finding new ways to go after people's pension pots including offering free pension reviews and promising to invest in funds that don't necessarily exist. 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. We will be monitoring pension scams closely in order to track how they are evolving, and warn consumers what to look out for."
If it sounds too good to be true, it probably is!