Pension fraud rockets as freedoms take hold
Worrying figures from the City of London Police and a financial advice firm specialising in pensions seem to suggest pensions fraudsters are stepping up their efforts in wake of the new pension freedoms.
According to figures from the City of London Police, the total amount lost to 'pensions liberation fraud' - a type of fraud where scammers convince investors they can get better returns from riskier, often fictional investments - skyrocketed to £4.7 million in May 2015, more than treble the £1.4 million lost the month before.
The police qualify their own findings by saying figures can be 'extremely varied', owing to the varying amounts victims will have invested. One particularly wealthy victim, for example, can skew the figures for a given month.
However, the May fraud total is the largest single month by far since May 2013 - which is as far back as the released figures go. Indeed, May 2015's pensions liberation total is almost treble the second-highest month for fraud, October 2013.
The average amount lost per reported case over the 25-month period recorded by police was £6,979 - but the May 2015 average was more than £60,000.
"Clearly the fraudsters are fully aware that many pensioners now have ready access to large capital sums and are potentially a soft target for the many and various scams that currently exist," says Malcolm McLean, senior consultant at advice firm Barnett Waddingham.
"These usually start with a cold call, a text message, or an email offering a free review with the prospect of substantially increasing the value of their savings by, for example, taking advantage of the "amazing" investment opportunities that they can provide.
"The results are invariably negative for the saver, with some of the victims losing the whole of their savings in consequence of being duped by the fraudsters," he adds.
Meanwhile the government has launched a task force of government, regulators, trade bodies and criminal justice agencies to warn pension investors of the threat scammers pose. In a statement from the Department for Work and Pensions (DWP), the government says the hidden nature of scams makes accurate calculation difficult, but that recent estimates suggest it could even be as high as £1 billion.
But a spokesperson for the DWP argued it is difficult to draw conclusions from a single remarkable month.
"You are looking at one month's data, and we need to perhaps look over a longer period of time rather than just one month," the spokesperson says.
Although he concedes it could mean fraudsters are targeting people with bigger pension pots, he adds: "I don't think one month's data in isolation will give you an accurate picture of what is going on."
Take up of the new freedoms by over-55s has been enthusiastic, with firms reporting telephone lines clogged with people enquiring about their options, and the government reporting £1 billion being withdrawn in the first two months alone.
The taxman has also been enjoying the extravaganza, with the government set to net tax revenues from people accessing their pension pots almost four times greater than first forecast.
We've been warned that giving savers access to their retirement savings from 55 could trigger a fraudster feeding frenzy, as research from KPMG showed that investment fraud was on the rise in 2014.
Meanwhile, a straw poll by pensions advice specialist Portal Financial found that two out of five surveyed people reported receiving more suspicious pension-related cold calls in the month leading up to the new freedoms' implementation.
This article was written for our sister website Money Observer