Avoiding the pension scammers
The following is a transcript of the questions they asked me about avoiding the pension scammers along with my answers.
Can you introduce your name and job title?
I am Nick Bamford I am a Chartered Financial Planner and Executive Director at Informed Choice in Cranleigh.
Pension savers are being warned of fraudsters who are trying to trick them out of their life savings – do you have advice to people that may be vulnerable to pension scams?
Only ever take advice from an individual or a firm who are authorised and regulated by the Financial Conduct Authority. Visit the Financial Services Register and check that the person you are speaking to is on that register www.fca.org.uk
What type of pension scams are common?
Prior to the recent changes to the way we can all access our pension pots, the common scams were around so called “pension liberation” where the consumer was convinced to move their pension pot to a new scheme and take benefits prior to age 55 (the earliest allowable access age) There were huge commissions charged and such access was also subject to very high tax penalties .
How can they be avoided?
Don’t engage with any one who cold calls you. Citizens Advice Bureaux reckon that 41% of scams start with a cold call. The Pensions Minister Ros Altman said on Twitter last week if you receive a cold call offering a “free pensions review” just hang up! And watch out for on-line approaches as well- that’s what the delete button on your keypad is for!!
What should people do if they suspect they have been or are being scammed?
Call your pension pot provider directly and tell them to put a hold on any transfer out of your plan. Report it straight away to the Financial Conduct Authority. Don’t sign any further documents and stop any correspondence or conversation with the potential scammer. No one who is acting in your best interests will ever be offended if you express concerns to them.
What signs should you look out for if you are being scammed?
Starting with the cold call. How did they get your number how did they know you had a pension pot? Often these are “fishing expeditions” they engage you in conversation and start asking more probing questions. The biggest one is the offer of something that sounds “too good to be true” Because of course it is too good to be true. High investment returns without risk are not possible! Investing in land that is going to get planning permission, no its not if it were the current owners would want to keep it for themselves! Investing in overseas hotel development etc are almost certainly scams
What are the new ‘freedom rules’ that fraudsters are using to trick people out of their money?
Access to pension pots from age 55 is now allowed subject to income tax on some of the benefits (25% tax free cash and 75% taxable benefits) Instead of using the bulk of your pension pot to buy an income for life, usually an annuity, you can take as much or as little of your pension pot as you wish.
Who are the most vulnerable to these scams?
Over 55 year olds who have personal pension plans. They might like the thought of getting hold of a capital sum now rather than a regular payment of smaller amounts. People who are not used to engaging with the financial services industry might be unaware of the steps that legitimate firms have to take to ensure they treat their customers fairly so the fraudster might not be asking for a lot of information. If you take advice from an unauthorised firm you do not receive the protections you deserve through the Ombudsman and Compensation schemes.
Has this been a rising problem?
Evidence suggests this is a growing concern. This morning I have been talking to a pension pot provider who is having to make extraordinary changes to their systems and processes to protect their customers from attempted scams.
What is the scammers aim?
They have one very simple aim. They want to take your money and make it theirs.
Have there been any particular case studies you have heard of where someone has been tricked out of their life savings?
We have seen a huge increase in the number of investments in “unauthorised collective investment schemes” Teak forests in South America, Hotel developments overseas, an Asian property fund and a waste re-cycling scheme in Poland none of the infrastructure of which actually exists. The scammers are not just selling so called investments these to unsophisticated investors but are quite widespread.
Consumers need to be very suspicious and challenge things that are being said to them.