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Be aware of fraudsters and pension scams!

by
01 July 2015, at 12:00am

DYLAN JENKINS looks at a few of the pitfalls awaiting the newly or soon-to-be-retired as unscrupulous companies or even criminal operations attempt to get their hands on people’s pensions

THERE have been a number of recent incidents of potential fraud and these criminals are becoming increasingly sophisticated, so do be aware and always double or triple check before giving information or making transactions.

Bank scams

One such scheme involves an individual being phoned, supposedly by their bank, to alert them to fraudulent activity on their bank account. They are often told to move money to a new “safe” account as the person who made the “fraudulent” transactions cannot then access the new account. There is of course no new account and by moving the money the victim will be transferring it to the criminal and will have no come-back from their bank.

What makes these calls so plausible is that the caller states that there has been misuse of an account but says he wants no information and that you should call your bank immediately on the number on your debit card or one you have looked up independently on-line.

However, the caller has not cut off the phone line so, when you telephone what you believe is your own bank, the original caller is still on the line, but you then think you have called the bank so it must be OK!

Pension scams

The new relaxation of pension rules from April 2015 has ensured the marketplace is now inundated with schemers and fraudsters trying to con you out of your hard-earned retirement savings.

It has been reported frequently of late that pension scams are on the increase in the UK. “Free pension reviews”, “one-off pension investments”, “pension loans” or upfront cash offers are being used to part savers from their money.

So what constitutes a pension scam? There are different types of pension scam but they can all lead to you losing a lifetime’s worth of savings in a moment.

As mentioned earlier, from April 2015 you have more choices about how you can access your pension pot than in the past. This should place you on high alert.

Fraudsters are likely to take advantage of these new rules by trying to persuade people to cash in their pension – either the whole lot or a large sum – and hand the money to them to invest. Watch out particularly for people contacting you out of the blue or adverts claiming to offer free pension reviews or no-obligation consultations.

Unscrupulous firms or individuals may also:

  1. Promise extra tax savings and/ or very high returns from overseas investments or new or “creative” investments.
  2. Claim to know of loopholes that allow you to get more than the usual 25% tax-free cash.
  3. Say they can help you or someone else unlock your pension before age 55.
  4. Encourage you to transfer your pension quickly, and even send documents by courier.

If you are under 55 you normally can’t legally access the money in your pension scheme. There are only rare cases where it’s possible to do this, such as if you’re in very poor health.

Pension scams where companies target savers claiming to help them take their pension savings early are known as “pension liberation fraud” or “pension loans”. If you take your pension savings early, it can result in tax charges of more than half of the value of the money you take out. Those being targeted are usually not told about the potential tax implications. This is in addition to high charges, typically 20% to 30% for entering into one of these arrangements and as well as high-risk investments for the remaining pension savings!

How can you spot a pension scam?

There are some common tell-tale signs that mean it could be a scam:

  1. Being approached out of the blue over the phone, via text message or in person door-to-door by a person or company you have had no previous dealings with.
  2. Where you aren’t given long to make a decision or you feel pressured into making one immediately.
  3. Where the only contact details they give you or are on their website are a mobile number and a PO box address.
  4. When a firm doesn’t want or allow you to call them back.

Some outfits may be very sophisticated and have convincing websites. Some may imply that they are part of the government-backed Pension Wise service by sneakily including “wise”, “guidance” or “pension” in their name.

Pension Wise offers impartial and free information and guidance on your pension options. It will never contact you out of the blue to offer you a pension review and it has only one website: www.pensionwise.gov.uk.

Once you’ve transferred your pension or handed over your pension savings, it’s too late. Many victims have lost their entire pension savings. Even if you don’t lose your money, you could be asked to pay a large tax bill on top.

What can one do if they think they are being targeted? First of all you should never be rushed into making a decision. You should also make sure the firm is registered with the Financial Conduct Authority (FCA) to conduct business before you agree to anything. Use the FCA’s online firm check at fca. org.uk/register or call the FCA directly on 0800 111 6768.

To be sure it’s the same firm in question, call them back on the switchboard number given on the FCA’s website, not any other number they may give you. If you think you have been scammed or that someone has tried to scam you, then immediately contact the FCA’s Consumer Helpline on the number mentioned above.

Sadly, the two forms of scam mentioned above are becoming increasingly common – if you do get any calls such as these you should report them immediately to the relevant authorities. If anything is offered that promises to be “too good to be true” then it probably is!