Warning over new risk of pension frauds
Pension scams are on the increase as people are about to be given greater freedom to invest their pension pots, the UK Government has warned.
As people over 55 become entitled from 6 April to draw down their pension funds, the Pensionwise Government advice website has published an alert to be on the lookout for cold callers – whether by phone, email or other communication – offering investment opportunities that turn out to be bogus.
Some are offering people the chance to take their money before they are 55, something that can only be done in exceptional cases such as illness. Often they ask people to draw down a large sum, or even their whole pot, as cash, and transfer it for them to invest.
“Most of these offers are fake but can appear very convincing. Their aim is to get you to cash in your pension pot and transfer the money. Once you’ve transferred your money into a scam, it’s too late. You could lose all your pension money as well as face tax of up to 55% or huge additional fees.”
In most cases 25% of a pension pot can be withdrawn tax free, but the balance of any larger withdrawal will be taxable.
As well as providing examples of real pension scams, the website offers advice on how to protect yourself, such as by checking whether the company contacting you is on the Financial Conduct Authority register.
Pensions Minister Steve Webb has himself been cold called by fraudsters, and recognises that there are more risks with the new rules. He said people should take professional advice and that the Pensionwise service was the place to go to.
Some in the industry have called for tighter rules against impersonation of regulated advisers.