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.
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.
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 £14m, with 18 such transfers blocked in the last month alone.
However, Jamie Jenkins, head of pensions strategy at Standard Life, stated that 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.
Earlier this month, the Financial Conduct Authority warned consumers are at risk of firms who are using the new freedoms to get people to transfer their pensions to achieve “better returns”. The regulator said many of the firms involved are unauthorised and “operating illegally”.
To address these issues, the watchdog is working with the Pensions Regulator and others on a multi-agency initiative looking at aspects of pension liberation and scams.
Last year, John Lawson, head of policy at Aviva, told FTAdviser pension liberation was already a £600m problem.
Mr Jenkins said: “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.”
He advised those who choose to take some or all of their pension fund as cash to 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”.
Earlier this month, the Pensions Ombudsman upheld a complaint against a pension liberation firm for failing to comply with a transfer request, but warned the claimant may need to take legal action to attempt to recover his fund of around £350,000 initially switched from a final salary scheme.
As reported by FTAdviser yesterday (29 December), the Pensions Ombudsman is also set to publish a group of cases about people who wanted to transfer out, but whose transfers have been blocked by their pension schemes.
In October, pensions minister Steve Webb confirmed that The Pensions Regulator has 27 open pension liberation cases, worth £185m of scheme money, but cumulatively it is a £420m problem.