April saw the Treasury introduce reforms to pensions. Those reforms essentially gave pensioners more choice and freedom regarding how to best utilise their pensions, and getting access to their pension funds.
Despite the reforms and greater choice for pensioners, not everyone was thrilled with the changes. Martin Wheatley, the chief Executive of the financial regulator and watchdog the Financial Conduct Authority (FCA), warned that the reforms could give rise to greater scope for pension fraud.
Commenting on the reforms earlier this year, Mr Wheatley stated that he expected con artists (who often target pensioners due to the money that they have available, and their sometimes lack of financial knowledge) to attempt to con pensioners whilst the reforms were still new, and whilst pensioners, banks and financial advisers alike are getting used to the reforms. According to Mr Wheatley, “scams and fraud, we know, tend to proliferate at the moment of maximum uncertainty.”
Previously, pension fraud has revolved mainly around getting people to “liberate” their pension funds prior to turning 55. Whilst considering that this was likely to continue, according to the FCA, fraudster would probably be trying alternative means in the light of the pension reforms; “a particular risk, given that many of those approaching retirement today will – unlike their parents’ generation – be carrying debts with them.” Those debts might well be their own – or that of children or even grandchildren.
As such, fraudsters and con artists might attempt to trick pensioners into drawing down most or even all of their pensions, according to the FCA, and other bodies. These agencies fear that, with the reforms giving greater freedom and choice over pensions, that pensioners will become increasingly vulnerable. Indeed, those approaching 55 have already reported being “bombarded” with people contacting them about lucrative schemes and similar for their pension funds, or otherwise attempting to scam pensioners.
In efforts to tackle this, local police forces, and specialist financial crime squads nationwide (including the Serious Fraud Office) are available if a pensioner fears that they have been targeted. Citizen’s Advice offers guidance regarding pensions via the Pension Wise service. The City of London Police has their own service, Action Fraud – which has reported that cases of pension liberation fraud have tripled in the months following the reforms.
From all the various agencies and advisory bodies, the advice is the same. Avoid people or companies offering the following popular scams:
- Unspecified financial products. Fraudsters often offer to invest pension funds in alternative financial products, without explaining what they are
- Free pension reviews. Fraudsters often posing as independent financial advisers, and offer to visit pensioners at home to conduct a free review, in order to access their pension details
- Investment schemes. Pensioners are increasingly being offered the opportunity to invest their pensions in supposedly lucrative investment schemes. Indeed, this method is becoming so widespread, that new legal reforms have classified this form of pension fraud as an investment fraud, to enable police and legal action to be swifter, firmer, and fines and sentences heftier.
Citizen’s Advice, the FCA and others have all recommended, amongst other measures, the following guidelines. Indeed, such guidelines are not just for pensioners:
- Check whether the investment scheme, company, or financial services provider referred to is registered with the FCA.
- Consider carefully any proposed investment scheme, and do your own research. Be particularly wary of any scheme promising lucrative returns.
- Never give personal financial details to a cold caller
- Seek third party, independent advice before agreeing to any pension transfer
- Carefully consider any proposals, and never do anything in a hurry
- If a company or scheme seems wrong, or if you suspect wrongdoing or a fraud, contact the police or the FCA immediately.
Your pension is your hard earned savings for your retirement. Do not allow yourself to be a victim of fraud. The police suggest that the activities of such con artists and fraudsters might be on the rise; as such, be vigilant and vary, and take the necessary steps to protect your hard earned pension. Do not allow yourself to be pressured into any financial decision; after all, it is your money, and your choice.