‘Beware of pension humbugs who will mince you’

‘Beware of pension humbugs who will mince you’

Pensioners must be alert as the budding defrauders, whose numbers have proliferated since the introduction of the pension reforms, will be out in force, David Smith has warned.

The director of financial planning at Tilney Bestinvest said that five months on, up to £9m of pensioners’ monies had been stolen, which he warned could be artificially low, as many will not have know their money had been stolen – yet.

“Ultimately, nothing sums up the situation better than the old adage; if it sounds too good to be true, then it probably is. For good quality advice on the options available and a suitable path forward you should always meet with a regulated adviser. Use the FCA register to find an approved adviser, or get in touch with Pension Wise for guidance,” he said.

He said the tactics they use, to encourage people to transfer their pension savings to them, were constantly changing. It included offering free pension reviews or health checks and promises of better returns on their savings, pension loans, upfront cash or other tempting propositions.

Some of signs David Smith highlighted for people to look out for
The Cold Caller

Very rarely, if ever, will an FCA-approved person contact you out of the blue ‘with an opportunity’. Invariably, taglines which require you to act now or sign up immediately are clear warnings of a scam, designed simply to pressurise someone into making a rash decision.

Key Phrases

‘Once in a lifetime opportunity’, ‘Guaranteed Returns’, ‘Completely Tax Free’, ‘Legal Loophole’:

We have all been quoted lines like this before but if any such terms are used by a ‘pensions’ specialist’ ringing you out of the blue - hang-up immediately.

Such terms will rarely, if ever, be used by an FCA-approved person and certainly not in an opening conversation. Pensions are complicated and multi-faceted: It’s therefore nigh on impossible to provide any form of worthwhile guidance on a pension until ‘hard facts’ have been obtained in writing from the pension provider.

Offshore Opportunities

An immediate alarm should sound as soon as you are offered an ‘offshore opportunity’. Any schemes which involve moving your funds abroad have a high likelihood of being scams. They will typically be unregulated investments, which have little to no financial protection from the Financial Services Compensation Scheme (FSCS). Indeed, any offshore investments that go wrong can be very difficult to recover.

Residential Property Investment Opportunity

Whilst your funds are held within a pension, it is explicitly forbidden to invest in residential property and anyone falling foul will suffer severe financial penalties. In order to make such investments, you would have to physically withdraw your capital completely from the pension scheme prior to investment – an action which could cost thousands of pounds in tax.

Early Access

The new freedoms have offered greater access to pension funds than ever before. You must however, be over 55 years old to draw from your pension. Only if you are in certain professions or in cases of extreme ill health can you access your pension funds early. If neither applies to you, you’d better set your alarm for your 55th birthday…

Upfront Cash or Loans

Individuals are unable to obtain loans against their pension funds and any such arrangements would be classified as ‘unauthorised payments’ and bear large fines.