It will be more difficult for providers to prevent savers losing their pensions to frauds after 6 April, Parminder Dhothar of Phoenix Group has warned.
The group’s intelligence and investigations manager said he had seen an increase in investment fraud since the announcement of pension freedoms in last year’s Budget and a move away from liberation frauds.
He said: “A brief analysis of suspicious pension transfers investigated by Phoenix has revealed that in the past six months more than 80 per cent were linked to dubious investments – commonly things like overseas property or hotels.
“If a customer wants to take cash from their pension and subsequently invest it into one of these schemes, it is going to be difficult for providers to prevent.
“However, there are things providers can do. Firstly through highlighting the issue to customers – we already include leaflets in our retirement packs, have warnings on our website and are running this awareness campaign.
“We will also strongly encourage customers to use the Pension Wise service and recommend they preferably seek independent financial advice.”
Mr Dhothar said Phoenix had come across a number of outlandish investments recently that target pensions.
These included overseas hotel rooms promising “guaranteed returns” and percentage payment every time the room is let – though on one occasion the development hadn’t even been built.
Storage units, overseas forestry, precious metals and wine have also been pushed as investments that people can put their pension savings into.
With pension liberation schemes, a provider can prevent the savings from being transferred if it suspects it may be fraudulent.
Last year HM Revenue & Customs introduced new rules and powers to crack down on pension liberation, and since then Phoenix has seen a drop in these frauds.
Both the FCA and Treasury were asked to comment but did not respond.
Simon Mansell, managing director of Worcestershire-based Temple Bar Independent Financial Advice, said: “The whole idea of removing the control from the provider enables the client to have freedom.
“This is something which is undesirable, but it is a natural consequence of allowing individuals to have free choice.”