The introduction of pensions freedoms is to be probed by MPs amid fears savings are being plundered by fraudsters.
An inquiry launched by Parliament’s Work and Pensions Committee will scrutinise the reforms after it emerged that more than £40m has been stolen by scammers in the last three years – with almost £5m snatched between January and May 2017.
Last month the government announced that a planned ban on pensions-related cold calls would widen in scope, to include emails and text messages.
Launched in 2015, the freedoms give the over-55s more options on how and when to use their savings. However the committee has raised concerns about the scale of pensions fraud since the policy was announced, and is alarmed by claims that con artists are using an anti-scammer kitemark in a bid to look legitimate.
It’s also concerned that few people are accessing advice about their pensions, with just 7% of over-55s using the free and impartial Pension Wise service in the two years before they plan to retire.
Concerns have long existed about ‘early release’ or ‘pension liberation’ scams, in which people are encouraged to move their pension pot out of a HMRC-recognised scheme before they hit 55, the minimum age at which you can access your pension, unwittingly incurring a blood-curdling tax charge of 55%.
Often the funds were transferred to an inappropriate or risky investment – and in the worst cases simply stolen altogether. However the introduction of new pensions freedoms for the over-55s in 2015 has led to concerns about older people being targeted to transfer their funds to much riskier schemes.
These scams overwhelmingly begin life as cold calls, and a Which? Money investigation in February 2017 exposed the ease with which a phony ‘pensions advice’ firm could obtain phone numbers and other sensitive personal details from data list brokers.
Savers ‘more vulnerable than ever’
Committee chairman Frank Field said: ‘Pension freedom and choice liberated savers to choose what they wanted to do with their own money.
‘This was welcome, but as with any radical reform it is important to monitor its practical effects closely to ensure it is working as envisaged. In this case it is vital that adequate support ensures people are equipped to ensure they don’t make decisions they subsequently regret.
‘I am particularly concerned that savers are more vulnerable than ever to unscrupulous scam artists. This policy must not become the freedom to liberate people of their savings.’
Pensions and investment platform AJ Bell welcomed the inquiry, with senior analyst Tom Selby commenting that it will ‘hopefully put a rocket up officials dilly dallying over the implementation of vital protections from scammers, including a proposed ban on cold-calling.’
A Department for Work and Pensions spokesperson said: ‘Pension freedoms give people choice over how they use their hard-earned savings, but it is important that they are aware of the risks of fraud and seek proper guidance before accessing their money.
‘Alongside the guidance provided by Pension Wise our proposed new measures to ban pensions cold-calling will ensure that savers are protected from the threat of pension scammers and we look forward to working with the committee on this inquiry.’
The committee is now welcoming written evidence until Monday 23 October 2017 on a range of matters outlined on its website.