As we approach the new Pension Freedoms era, retirees are being told to be aware of a new wave of fraudsters trying to steal their life savings.
Experts are worried that the new freedoms will be a golden opportunity for would be criminals and estimate more than half a billion pounds has been lost so far to these pension scammers.
From 6th April 2015, retirees will be able to withdraw the lot and spend it as they wish. However, there are fears it could create a bonanza for criminals.
Anyone who is contacted by telephone, email, text, letter or even door to door salesman and are offered ‘one off pension investments’, ‘pension loans’, ‘legal loophole’s or a ‘cash bonus’ should be extremely wary.
In most cases, these opportunities are little more than scams designed to steal away most, if not all, of your pension savings.
A common trick is a call to tell you that you can access your pension savings even if you haven’t reached retirement age. In most cases, you can’t touch your pension pot until you’re at least 55 years of age. Try to access them before and you’ll be hit by a tax charge of up to 55%.
The criminals offering the deal will take a cut of up to 40% and the retiree is left with virtually nothing.
In one case seen by the Pensions Regulator, a woman in her early 50’s was left with a £62,700 tax bill after her £114,000 pension pot was cashed in. After the 55% tax bill and the fraudster’s fee, she was left with just £5,700 of her life savings.
Other tricks include tempting you with the opportunity of handsome profits. As a rule of thumb, if you see a scheme which is promising rates far higher than you can get elsewhere, you should be extremely wary.
Often, these opportunities mean transferring your money to a new scheme. As a rule of thumb, If a saver makes a bank transfer themselves, then there is no protection. Motorcycle couriers are also being used in many of these tricks.
Victims are contacted about an investment opportunity. They are told they can take their money out of their pension scheme and put it into a new alternative that guarantees a juicy return. A few options range from investing in so called ‘ethical’ schemes, property developments abroad or in UK storage facilities.
In other cases, pension savers have been offered a free pension review. Once the saver agrees, a courier is sent to the victim’s house to give them documents and pressure them into signing.
City regulator, the Financial Conduct Authority (FCA), gets around 5,000 calls every year about investment fraud. The average saver loses £20,000 in each instance.
If you feel you have or are being targeted, contact the Financial Conduct Authority by clicking the link or call Retirement Professionals Ltd on 0800 098 7050. We will direct you to the right place dependent on your concerns.
April 2015 changes at a glance.
* A guaranteed income for life – an annuity.
You could be paid a set amount every month for the rest of your life, so you’ll know exactly how much you are getting and when.
– Combine the value of your pension pots
– Take up to 25% tax free
– Use the rest for a guaranteed income
* Flexible Access – Flexible Drawdown or Partial Pension Encashment (PPE).
The current restrictions for flexible access to your pension pot will be lifted from April 2015 when you can take out what you like when you like. The rest is left invested so it has the potential to grow.
– Take some money tax free
– Leave the rest invested
– Take bits when you need it
* Take it all as cash – Full Pension Encashment (FPE)
From April 2015 you’ll be able to take all your pension pot out in cash however much it is. At the moment the amount you can take is capped depending how much you’ve saved and how many pots you have.
– Combine the value of your pension pots
– Take up to 25% tax free
– Get the rest subject to tax
* Leave it all for now – Defer your pension.
Keep your money where it is in your pension pot. It’ll give you the time to think about your pension options and you can plan how best to use it to provide for your future. Your pot is left invested so it has the potential to grow.
– Do nothing now
– See how your money could grow
– Decide what to do later