Quantcast
Menu
Save, make, understand money

News

Pension freedom fraud ‘25% higher than previously feared’

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
25/10/2016

Fraud losses in the immediate period after the introduction of pension freedoms could be a quarter higher than originally thought.

Previously it was believed that around £10.6m of pension fraud losses had been reported to the City of London Police in the six months from April 2015.

However, updated statistics obtained by investment platform AJ Bell reveal  this figure has been revised upwards to £13.3m.

This is 25% higher than the original estimate and is due to victims often updating their reports of fraud to reflect the actual full amount lost.

The year-on-year spike is therefore also much higher – 146% – from the £5.4m in the same period in 2014. The table below shows the reported pension fraud losses:

ymoney-pensionfraudtable

In total, since the City of London Police started tracking pension fraud losses in May 2013, victims have lost more than £40m.

A petition calling for the government to ban and make pensions cold calling illegal has so far attracted almost 2,000 signatures.

AJ Bell senior analyst, Tom Selby, said: “Judging by this data, the post-freedoms pension fraud spike was worse than we had previously feared, and yet the government continues to sit on its hands when it comes to taking meaningful action to deter scammers.

“More than £40m of pension fraud losses have been reported to City of London Police since May 2013, while estimates of total losses UK-wide from pension-related fraud – including investments – run into the hundreds of millions. This does untold damage to both the victims whose long-term savings are decimated, and to the reputation of pensions as a whole.”

Selby said Prime Minister Theresa May has indicated an appetite for intervention and believes she should start by “strengthening the government’s response to the threat of pension scams.”

Top tricks used by scammers

Pension Life, a campaign group set-up to help victims of pension liberation scams who have lost a combined £2bn, reveals the top five tricks used by fraudsters which you should avoid:

1) Guaranteed results

Be wary of any firm guaranteeing investment returns because returns can never be guaranteed.

Pension Life said scammers typically use the magic 8–9 per cent growth a year number for two to five years.

2) Property, particularly the mention of ‘offshore’

Scammers will promise spectacular growth opportunities with all sorts of unusual – or ‘esoteric’ – property developments. Property is illiquid and pensions need to be liquid so if you want to transfer out, reach age 55, retirement age or dies, the fund can be moved quickly. If it’s tied up, it can take years to get out of the investment and it may attract punitive penalties.

3) Unregulated advisers and funds

If there is no regulation, there is no protection. A phrase such as Company X works in conjunction with a fully regulated and authorised company’ usually means it’s not regulated so if it goes bust, you’re not protected. You can check on the Financial Conduct Authority’s site.

4) Scheme looks like an advisory firm

Individuals should watch out for schemes presented by a company acting like it’s giving advice, but claims, if things go wrong, that no advice was given.

5) Check there’s a ‘fact find’ for your risk profile

Any investment recommendations should respect the individual’s risk appetite. Most ordinary people are ‘low-risk’ – but the scammers often try to trick victims into agreeing they are ‘sophisticated’ or even ‘high risk’.