The Insolvency Service has revealed it shut down five pension liberation companies in the 2015/16 financial year, after they scammed pensioners out of £128m.
The fraud affected around 500 investors and involved investments in storage pods and a loan company.
Two of the companies - KJK Investments and G Loans - worked together to persuade investors to take out a loan from one of them, G Loans, to invest in the other. They guaranteed investors a 6 per cent per annum return, which they said would be enough to repay the loan.
However, the Insolvency Service stated the companies did not disclose that the loans were actually being funded directly by the pension savings invested in KJK Investments - meaning investors were essentially borrowing from themselves.
The 209 investors lost a total of £11.9m through this scheme.
The other three pension companies - Imperial Trustee Services, Omni Trustees and Transeuro Worldwide - invested in storage pods through occupational schemes or self-invested personal pensions.
Storage pods - containers in which to store belongings - were classed as high-risk unregulated investments by the Financial Conduct Authority in 2014.
The Insolvency Service estimated it had saved pensioners an extra £107m in further scams by shutting down the companies.
“We will also seek to prevent the directors of these companies from going on to set up new companies where we have sufficient evidence of wrongdoing,” read a statement.
Alan Chan, a chartered financial planner with IFS Wealth & Pensions, said he was not surprised by the scale of the scams, saying pension freedoms had increased the threat.
He said he had been contacted my a number of potential scammers, referring a few to the Financial Conduct Authority. He said something needed to be done about it, suggesting better classification of unregulated investments over a ban on cold calling.
“I think even if there was a ban on cold calling, people would still do it,” commented Mr Chan.
He said people “feel a bit disconnected” from their pension money, meaning they are more willing to invest it in risky unregulated investments.
“These scammers understand that mindset,” he said.
james.fernyhough@ft.com
