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Pension scams will increase with new pension freedoms

29th December 2014 Print

Criminals are refocusing their attention on those aged 55 and over who will soon have access to the new pension freedoms and flexibilities, according to Standard Life.

Pension liberators – often known as pension scammers – are evolving their tactics to approach individuals who choose to take some or all of their pension fund as cash from April 2015.

The company believes those at retirement will be far more exposed to losing their life savings to such scams, as the ability of pension providers to prevent transfers of funds into fraudulent, too-good-to-be true investments will diminish once the new freedoms come into force.

Some estimates suggest pension-related scams have already claimed up to £500 million in savers’ money. In such scenarios, victims were advised to “liberate” their pension savings from their existing scheme and into a fraudulent or non-existent scheme before they turn 55, which is not permitted. Many people were lured into such offers on the basis of exploiting a ‘legal loophole’ that would mitigate any tax liability. Such a loophole simply doesn’t exist.

Currently, providers can block the transfer of a member’s pension fund into another fraudulent scheme by conducting “fit and proper” checks. Standard Life has blocked around 400 suspicious transfers, totalling almost £14 million, and has blocked 18 such transfers in the last month.

“While providers will still be able to stop transfers from one pension to another, the new retirement freedoms will mean people may simply release their cash and then pass it on themselves to people running scams,” says Jamie Jenkins, Head of Pensions Strategy at Standard Life. “Criminals have adjusted their tactics to the new pension freedoms and no longer need to fool both the individual and their provider into transferring funds. We can expect those who take their pot as cash to be approached directly – via cold calling, emails, and other means – to entice them into legitimate-sounding investments. Those who choose to take some or all of their pension fund as cash should be vigilant about such approaches, and mindful that they bear the entire risk of investing in dodgy schemes without the protective umbrella of their provider.”