Clampdown on liberators needs concerted effort

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Clampdown on liberators needs concerted effort
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The suggestion by Phoenix Group that pension savers are almost three times more likely to be approached by scam firms than they were nine months ago should be causing concern among the industry and regulators.

From April there will be a huge pot of money up for grabs, and predators are circling – both from inside and outside the financial industry.

What is worrying is how easily people appear to fall for the sales pitches. According to Phoenix, one in six of those targeted by pension scams went ahead and contacted the firm in question.

One in six of those targeted by pension scams went ahead and contacted the firm in question

And it is not just the clichéd old and vulnerable who are falling victim. Instead it is younger people who are seizing the opportunity to get at their pension cash decades early.

Almost one in eight 18-to-34-year-olds who have been contacted by pension liberators told Phoenix that they had released some or all of their cash.

Of course, when it comes to losing large amounts of money, older savers – who have the biggest pots and less opportunity to make good their losses – have most to lose.

But the long-term damage inflicted on youngsters is also considerable once lost investment opportunity is taken into account.

Fees can be as high as 30 per cent, and investors can also suffer tax penalties of up to 70 per cent.

Last November the Pensions Regulator shut down five connected liberation schemes that had taken £134m from more than 1,400 people. And the pensions industry has done good work in blocking transfers that look suspect.

But these figures demand more. The odd story in the personal finance pages is not enough. There needs to be an education campaign aimed across all age groups.

If the pension industry cares as much about this fraud as I believe it does, then firms need to contact every single saver to warn of the dangers.

A single, simple leaflet agreed by all the major firms could explain in plain English what these scams are, who is being targeted, how the scams work and, crucially, what they could cost.

I can see two problems. The first is that compliance lawyers would no doubt put a spanner in the works. The second is that it would cost a few quid.

But surely this is nothing compared with the potential losses if these scams continue to grow at the present rate.

Watch out – there’s a pensions shark about.

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Direct and simple

Talking of plain English, pension companies are finally going to be forced to use it when communicating with their customers. All I can say is hallelujah and pass the tambourine.

It is complete madness that in so-called disclosure documents that are supposed to enlighten those approaching retirement, firms have been able to use industry jargon.

Single-life, joint life and enhanced annuity might mean something to you and me. But it means diddly-squat to the man on the Clapham omnibus.

The FCA’s new rules will force firms to ask people key questions about their health and lifestyle choices and marital status. And crucially the messages must be delivered in “direct and simple language”.

Now let us start righting the wrongs that have been inflicted over the past few years.

As pensions campaigner Ros Altmann points out, it is more than six years since the regulator found evidence that people were being sold inappropriate annuities because firms were not bothering to ask the right questions.

It is time those people – and their surviving spouses – received proper redress, while they are still around to benefit.

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Pension whine

Sorry to go on about pensions, but while browsing internet message boards I saw something that shocked me.

A qualified financial adviser was complaining that he had applied for a role with the new Pension Wise scheme and had not even been called for interview.

This backs up a conversation I had last week with another adviser saying they did not seem to be wanted by those running Pension Wise.

So what is going on? Is it egos at the centre of this scheme, as one adviser suggested to me? Is there a bias against those who may have too much knowledge? Are the recruiters afraid that a former adviser may try to sell something or pass a potential client on to a mate? Or is the recruitment process simply flawed?

Perhaps those handling the CVs know as little about financial advice and its qualifications as those they wish to recruit.

Tony Hazell writes for the Daily Mail’s Money Mail section

t.hazell@gmail.com