Pension scams cost savers millions

As research shows fraudsters targeting people under-55 and encouraging them to access their pension early is on the increase, Which? investigates some of the causes.

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

Pension liberation schemes target people under-55 and encourage them to withdraw or transfer their pension savings. 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, is not permitted and consumers face losing up to 70% of their pot as a tax penalty.

And yet we 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, often charging exorbitant fees.  

Many of these sites, which could potentially be scams, also appear prominently when searching online for phrases such as ‘cashing in your pension’ and could be contributing to an increase in pensions liberation scams. The Financial Conduct Authority has issued a clear warning to savers about opting for early pension release, but adverts for early pension release often downplay the risks.  

Which?’s ‘Safeguard us from Scams’ campaign calls on businesses, regulators and the Government to do more to protect consumers from online scams. As part of this work, we have asked Google to work with the Financial Conduct Authority to stop firms targeting consumers through misleading online adverts.  

Alex Neill, Which? Director of Policy and Campaigns, said:

“Pension scams are a worrying problem and are costing savers millions of pounds.  Unfortunately, criminals will always find ways to try to target your money and it’s hard to tell the difference between the genuine and the dodgy online adverts.

“Even the savviest people can be scammed by fraudsters, so it’s critical the Government, regulators and businesses redouble their efforts to protect consumers from these scams.

Which?’s How to avoid pensions scams guide offers free independent tips on how to avoid potential pension scams.


Notes to Editors

  1. Pensions liberation scams: City of London Police figures on pension liberation fraud show that in the year to February 2015 cases of pension liberation fraud was valued at £10.5m (average of £5,576), while in the year to February 2016 cases worth £13.2m (average of £20,625).

  2. Safeguard us from Scams campaign: In May this year, Which? launched its campaign, calling on the Government’s Joint Fraud Taskforce to review how businesses take responsibility when their customers are scammed and report by the end of the year. This followed research that found that six in ten (62%) people said they had been targeted by online fraudsters in the past 12 months.

    Populus, on behalf of Which? surveyed an online sample of 2066 UK residents between 22nd and 24th April 2016. The responses were weighted to represent the demographic characteristics of the population as a whole.

    Since the campaign launched more than 102,000 people have signed our Safeguard us from scams campaign.

  3. Tips to spot a pension scams:

  • Ignore unsolicited calls and texts about your pension.

  • Avoid firms using phrases such as pensions liberation, pension loan, loophole or free pension review.

  • Think twice about using any companies promoting access to your pension, or early pension release before you reach 55.

  • Never rush into agreeing a pension transfer and your current provider should check the HMRC registration of the new scheme if you are transferring your pension.

  • If you’re unsure, speak to a financial adviser who’s not associated with the pension deal.

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