Pension liberation scammers are responsible for an 18% rise in the amount of stolen pension savings in the first half of 2014.
Pension savers have experienced a £495 million raid on their funds by fraudsters, according to The Pensions Regulator (TPR), a figure that has risen from £420 million since the end of last year.
TPR suspects the actual amount of pension money that has been lost to criminals through so-called liberation schemes is likely to be "substantially higher", as not all activity is reported.
Pension liberation scams work by fraudsters promising to transfer victims' pension savings to an arrangement that will allow them to access their funds early – before they turn 55 (only in rare cases is this normally possible, such as if they are suffering from a terminal illness).
In almost all cases, the money is switched into high-risk or non-existent investment schemes, many of which are based overseas. In return, the con artists can swallow up half of the amount in charges, while victims will also owe tax to HM Revenue & Customs (HMRC) for taking an 'unauthorised payment'.
Some individuals have lost as much as £1 million but the regulator commonly sees the loss of smaller but still significant amounts and the effects can be devastating.
The regulator gave the example of a family grieving for their 40-year-old son who had fallen victim to such a scam and taken his own life after never receiving a promised £17,000 lump sum following the transfer of his £42,000 work pension.
His mother said: "I don't want other mothers to suffer what I've been through, and what my family has been through."
She added: "No matter how desperate things get, don't be tempted to cash in your pension. Don't do it – the people behind these scams are rogues who exploit people's vulnerabilities."
A 49-year-old scam victim found herself facing an £18,000 tax bill and at risk of losing her home and offered the following advice to other pension savers: "These scams target vulnerable people. I feel very angry that I have been misled. Ignore the sales patter, ignore the glossy websites, ignore the cold calls and text messages. Go to an independent financial adviser – speak to an expert."
The authorities are clamping down on pension fraud. TPR has secured court action to freeze the assets of 20 pension liberation schemes, while the National Crime Agency has brought about the suspension of 18 pension liberation websites, and an investigation by City of London Police resulted in seven arrests in May.
However, TPR warns savers that they must continue to be vigilant. "Since we launched our first campaign against this type of fraud last year, we've seen the scammers tactics evolve further," a spokesman said.
"In-home visits from 'introducers', claims about 'legal loopholes' and unusual investments like overseas property, storage units or biofuels are all used to fool members into thinking they're being offered a legitimate pension transfer. The truth is that these members often never see their pension again."
The Pension Advisory Service (TPAS) gives the following advice for anyone who thinks they are being targeted:
- Never be rushed into making a decision
- Make sure the adviser is authorised by the FCA at fca.org.uk/register
- Before you sign anything, call (TPAS) on 0300 123 1047 for information and guidance about pension scams
- If you have already accepted an offer, raise the alarm by calling Action Fraud on 0300 123 2040.
- Don't proceed unless you are absolutely certain your money will be safe. Once you transfer, it's too late.