City of London Police figures show that in the 12 months to February 2016, £13.2m was lost to pension liberation scams – an increase of 26% from the previous year.

Pension liberation scams target those aged under 55, encouraging them to access their savings pot by either withdrawing or transferring the money out.

However pensions are designed to only allow savers access to their money after they turn 55.

Accessing pensions savings before 55, unless in exceptional circumstances such as ill-health, isn’t allowed and you could face losing up to 70% of your pot as a tax penalty.

A Which? investigation found that companies offering early pension release for those under-55 are clearly advertising their services online.

These sites offer early access to pension savings, potentially exploiting consumer confusion with the new pension freedoms, and don’t explain the huge losses at stake, while often charging exorbitant fees.

It also found that many of these sites, which could potentially be scams, appear prominently when searching online for phrases such as ‘cashing in your pension’ which could be a factor as to why there’s been an increase in pensions liberation scams.

Which? said that even the savviest of people can be scammed by fraudsters, so it’s critical the government, regulators and businesses redouble their efforts to protect consumers from these scams.

Kate Smith, head of pensions at Aegon, said it takes years to build up a decent sized pension pot, but can take minutes for it to disappear if people fall victim to fraudsters.

“A common tactic is to move your pension overseas, commonly to Malta or Hong Kong, promising that doing so can double your money in ten years’ time.

“In the worst case scenario people risk losing all their pension savings and face paying a hefty tax bill, leaving them with nothing to live on in retirement.”

How to avoid pension scams

Which? says you should never be rushed into making a decision so here’s how to spot and avoid pension scams:

• You should always be suspicious if anyone calls you out of the blue to offer you a money-making deal which include phrased such as pension liberation, pension loan, loophole or free pension review.
• If someone calls you, always ask to call them back. Reputable companies will always be happy to let you do this, whereas scammers tend to be more wary about giving contact details.
• Any review of your pension should be conducted by a regulated financial adviser.
• While some firms might pretend to be offering free guidance, some even pretend to represent Pension Wise which the government has made an offence in recent legislation.
• Check the FCA’s register of regulated financial services providers. This will tell you if the company is registered as well as listing any companies being investigated.