New research has shown that almost 15% of those over the age of 55 have been targeted by fraudsters promising to release, liberate or review their pensions in what has been described as little more than a Ponzi scheme.
A survey carried out by employee benefits consultants ‘ agency Portus has revealed the extent of the attempting fraudulent action by scammers that has come about since the new pension freedoms were announced in April 2015.
The new freedoms provide pension holders with unprecedented access to their pension funds once they reach the age of 55. This has opened the door for scammers to get hold of this money for themselves. Those over 55 can release 25% of their pension pot as a tax-free lump sum and can now release the remaining 75% as well, though it will be subject to, often heavy, taxation. Those that fall victim to scammers will, in the best case scenario, end up with 55% taxed from 75% of their pension pot, and then typically a further 20-30% taken by the scammers, leaving them with little remaining. In the worst case scenarios, the entire pension fund can be taken.
Typical scams include victims being contacted by fraudsters offering “free pension reviews”; claiming that they can better invest existing pension funds. These “pension review” scams, which affected over 66% of those surveyed by Portus, are essentially used as a cover for the scammers to “push suspect investment schemes including airport car parking spaces” said one journalist at the Financial Times.
Portus reported that most victims had been contacted in unsolicited e-mails, offering to make use of their pension funds in “exotic investments” with promises of great returns, but in reality, these promises turned out to be bogus. While many of those marketing these schemes stick by the fact that investment in airport parking space can lead to high returns, police have announced that they believe any pay-outs that do come to simply be made up from other investors ‘ money; basically a Ponzi scheme.
This study comes after warnings have already been issued by many that the new pension freedoms have done as much harm as they have good, putting thousands of people at risk and, as some MPs have said, are “endangering savers.”
The problem is that many people now have access to enough money to invest in funds that would previously have only really been accessible to experienced investors. The layman is easily duped by scammers claiming to be able to promise incredibly high returns on incredibly risky investments.
Portus ‘ director Steve Watson has said that “the pension freedoms were a good idea and shouldn ‘t be trashed,” but pointed out that “this change must go hand in hand with education and people should have access to good advice.”
– 1/7 over-55s targeted altogether
– Over 2/3 of victims offered “free pension reviews”
– Over 1/2 of victims approached multiple times
o 1/3 approached up to 5 times
– Only just over 1/10 reported scams to the authorities
– 36% of victims contacted by e-mail
– 33% of victims contacted over the phone