Experts are warning retirees to be on the lookout for fraudulent activity when the new pension freedoms are introduced on April 6th.
Up to this point, experts estimate that over half a billion pounds has been stolen by criminals operating various types of pension scams.
The fact that the new pension legislation give retirees the ability to withdraw the entirety of their pension pot means a number of people are worried that running a scam will look more and more lucrative to a number of criminals.
It was revealed yesterday that cold callers have been purchasing the information of pension savers for as little as 5 pence. Retirees should be very vigilant when it comes to anyone who is contacting them by phone, text, letter or email and proposing loopholes to pension schemes, bonus facilities or ìone-off pension investments.î
Another common tactic that these pension scams use is to call someone and convince them that they can withdraw their savings before the age of 55 years old.
All of these approaches are simply ploys in order to take the necessary personís details, and steal either part or all of their savings.
In the vast majority of cases, a person does not have access to their pension pot until the age of 55 years old. Those that do attempt to withdraw money earlier than this are often charged exorbitant tax rates that can rise to 55% whilst the company running the scheme take as much as 40%, leaving the pension saver with very little.
An example has been given by the ëPension Regulatorí in order to illustrate the dangers of these scams. A pensioner in their early 50s withdrew a scheme worth £114,000 and had to pay a tax bill that amounted to £62,700. Including the charges incurred from the company running the scam, this pensioner ended up with a measly £5,700 for their retirement.
Other tactics used by these criminals include offering schemes with implausibly attractive rates. As a general rule, one should be extremely sceptical of schemes that offer rates significantly better than anyone else on the market.
Additionally, pension scams often involve the personal transfer of your existing savings to a new scheme. This is because if the consumer directs the bank transfer themselves, they are not protected by the current legislation.
A technique tied up in this activity is to use motorcycle couriers to expedite the transaction. Firstly, the saver is contacted by the illegal firm and sold on an investment opening, often citing property developments abroad, storage spaces within Britain and a number of ìethicalî schemes.
Once the pensioner has agreed to take part and transfer the money, the fraudsters send a motorcycle courier to visit that personís home and ensure they hand over and sign the necessary documentation.
The estimated amount of money that has been lost to these types of schemes is £600 million. Furthermore, the Financial Conduct Authority has published data revealing that they receive roughly 5000 calls per annum pertaining to investment fraud and that the average loss in each case is £20,000.