A third of Brits targeted by pension scammers

10 December 2014

More than a third of Brits have been targeted by 'pension liberation' fraudsters, an insurer has found. The majority of scammers are using emails and texts to target their victims.

The messages invite the recipient to 'review' their pension or 'release' a portion of it as cash before the legal retirement age of 55, explained Phoenix Group.

Some 10% said they had been contacted about an old investment or savings policy they had forgotten about, with the company telling them it could give them the details for a fee.

More than a quarter of those contacted admitted to having been tempted to accept the offer and some 15% subsequently contacted the fraudsters.

In almost all cases of pension liberation fraud, people's pension pots are switched into high risk or non-existent investment schemes, many of which are based overseas. In return, criminals routinely take half of someone's pension pot in charges, while victims will also owe tax to HM Revenue & Customs (HMRC). Some individuals have lost as much as £1 million.

There is a growing fear that the new pensions freedoms being introduced in April 2015 is creating a ripe opportunity for fraudsters to exploit.

Just under a quarter of those surveyed by Phoenix said they were unsure about what to do with their pension when they turn 55. One in 10 said they would consider releasing as much as they could immediately with the rest put into an investment, which Phoenix said would leave them "vulnerable to pensions liberation scams".

The insurer said other pension scam methods it is aware of include policyholders being encouraged to move their pension funds into very risky investments. It warned that such investment scams "will be even easier to push once 55-year-olds get access to all of their pension funds in cash".

The company's research also found that while 27% of people would seek advice about investment from family, two-thirds wouldn't suspect fraud if they heard a 45-year-old friend or family member had been promised cash from their pension by transferring it to a new scheme.

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Unscrupulous businesses

Steve Hyndman, head of financial crime prevention at Phoenix, said: "People can lose their life savings through these scams. Many unscrupulous businesses offer customers the opportunity to unlock their pension, in exchange for cash, before they reach 55; often without making them aware of the fees they are charging for this service. The fees can be as high as 30%, in addition to the 55% tax charge they will incur for extracting money from their pot early."

He added: "To give an example of how they work, if you had a £10,000 pot and wanted to 'liberate' £3,000 of that, you would receive a lump sum of £3,000. However, the pension 'liberation' companies typically charge a 30% fee, so the fee could be as much as £3,300. You would expect the remaining £3,700 to be invested to give you an income when you retire – but there is a real risk that the money will not be there when you expect it."

Phoenix also revealed that two-thirds of its survey respondents had unexpectedly been contacted to be informed they had won a prize draw they didn't recall entering, and more than half had been told that they may have PPI compensation due.


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