BEWARE! THE PENSIONS CROOKS WHO WANT TO LIBERATE YOUR SAVINGS

Scrapping annuity rules in 2015 threatens a crime bonanza, conning the unwary into parting with their pensions. It is the answer to the financial worries plaguing you and your family. Access the cash locked up in your pension, pay down your debts, and leave some invested for your future. It even comes with a government endorsement, after the chancellor scrapped the annuity rules and the pension’s minister said you could blow all the cash on a Lamborghini if you wish. But anyone aged below 55 told they can “unlock” or “liberate” their pension, is being sold a lie.

The new freedoms that begin in April 2015 are for the over-55s only. Those younger than that, who take money out, will be subject to an “unauthorised withdrawal” charge by HMRC of at least 55%, rising to a maximum of 70%. Despite this, scamsters are hoping that April 2015 will open up a fraud bonanza as they use talk of “pension freedom” to con the unwary. Already victims have lost as much as £500m, with some estimates going as high as £1bn, and many are yet to realise their retirement fund has evaporated.

It usually starts with a call out of the blue, or a text message, or an email. It will offer you a “free review” of your pension and how you can obtain a “loan”, “saving advance” or “cashback”. If you agree, your pension fund will be transferred from your legitimate scheme into one set up by the company promising you early access to your money usually abroad. They will “loan” you part of your money (a small amount at first, to convince you they are real), then take a 30% fee for their services. They usually do not tell you about the enormous tax charge you face, but talk, instead, about the “amazing investment opportunities” you now have with what remains of your pension. The “amazing investment opportunities” are likely to be phoney carbon credits, rare earth minerals, penny shares and overseas property projects. Sometimes, the crooks are more upfront, and simply steal outright.

“The new pensions freedom has given a massive turbo-boost to fraudsters,” says Alan Higham, retirement director at Fidelity Worldwide Investments. “With eight months to go before it arrives, I already receive five calls or texts a week from dodgy firms offering a ‘free pensions review as promised by the government’.

“These are often from set-ups with names confusingly similar to those of regulators and regulated organisations.” John Fox, managing director of a pension provider, Liberty SIPP, had one customer who wanted to move £100,000 his entire pension into the shares of a Guernsey Stock Exchange regulated company. “It was on a recognised stock exchange but it seemed odd to us. We found that the shares at 4p had not been traded for 10 years. We told him he could not do this. He protested and the fraudsters sent us heavy legal letters but we stuck to our decision.” Fears are also growing that the over-55s, who can access their pensions subject to their marginal tax rate, will also be suckered into exotic investment schemes. Steve Hyndman, head of financial crime prevention at insurers Phoenix Group, believes he will be busier than ever. He says: “Taking money from the over-55s who will be able, legitimately, to do what they like with their pensions pot, will be far easier than current liberation frauds.

“Scam merchants will not have to go to the bother of trying to register phoney schemes to get past HMRC and people like me. “There are schemes already in force undertaking aggressive marketing to persuade consumers to cash in their pension. Phoenix has, so far, prevented more than £11m of potential liberation fraud, and expects to see more.” Clouding the issue is the fact that there are sometimes legitimate reasons why an individual might need to gain access to their pension money before the age of 55, for example if they have been diagnosed with a terminal illness. Margaret Snowdon, of JLT Benefits Consultants, is chair of the Pension Liberation Industry Group, currently finalising a “code of good practice” to offer clarity to trustees, scheme administrators and scheme providers. “We need a consistency of approach, to find a way to limit scams and protect legitimate trustees who have to make judgment calls on transfers. Trustees are in a bind. If they do not block fraudulent transfers, they are in personal jeopardy, but if they don’t allow good transfers, they can get in trouble as well.”

Culled from Guardian