Pension scams reach record levels

Pension scams reach record levels

According to the City of London Police, £8.6m in losses were reported by 24 victims of pension fraud in March, a sharp increase on the £779,000 reported by 12 individuals the month before.

In total, more than £42m has been lost to “pension liberation fraud” since April 2014, when the pension freedoms were unveiled by George Osborne, the former chancellor.

Victims of “liberation fraud” are often swindled into placing their pension funds in investments that do not exist, are illiquid or incapable of delivering the promised returns.

Victims are also usually not warned about the tax for “liberating” their pension funds before age 55, which can wipe out half the value of the retirement pot.  

According to the City of London Police data provided to the Financial Times, £13m in losses were reported from March 2015 to March 2016. 

Darren Cooke, director of Red Circle Financial Plannning, — who launched a petition that led to the government announcing it would ban “cold calling” in relation to pensions — said the sharp increase in reported losses in March was likely due to scammers “ramping up” their activities following publicity of the government’s plans to put a stop to their activities.

Last November, the government said a cold calling ban would “cut off a key source of pension scams” while significantly simplifying the anti-fraud message to the general public.

However, the government’s response to a consultation on the proposed ban, which closed in February, was delayed last month after UK prime minister Theresa May called for a snap general election. 

Andrew Pennie, head of pathways at Intelligent Pensions, said: “While pension freedoms give choice and opportunity like never before they also come with increased complexity and risk.

"The worst of these risks is pension scams, with ever increasingly sophisticated and persistent scammers after peoples hard-earned pension savings.

"Furthermore, where people lose their pension savings to a scam, the chances of recovering any of their money is remote.

“Regulated advice is the safest way for retirees to avoid being scammed by fraudsters or by their own actions.

"Employers need to do more, using their scale and resource, to provide employee advice solutions, whilst schemes and providers must do more to promote and make available the new pension advice allowance (PAA).

"Affordable advice solutions are available, particularly through workplace pensions, and cost is no longer a barrier to providing the peace of mind and reassurance of full regulatory protection.”