Fraudsters are increasingly targeting under-55s and encouraging them to access their pension early, according to new research.
City of London Police figures show that £13.2 million was lost to pensions liberation scams in the 12 months to February 2016 – an increase of 26% on the previous year.
Early pension release warning
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 under-55s 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.
Find out more: What the pension freedoms mean for you – see our video guide
Which? launches scams campaign
The Which? 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.’
Find out more: Safeguard us from Scams – support the campaign by signing our petition
Tips to avoid pension scams
We offer some tips below to help you spot a pension scam:
- Ignore unsolicited calls and texts about your pension.
- Avoid firms using phrases such as pensions liberation, pension loan, loophole or free pension review.
- Avoid any companies promoting access to your pension, or early pension release before you reach 55.
- Never rush in to 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.
Find out more: How to spot a pension scam – more advice in our consumer rights guide