Pension transfers: how to avoid failing victim

Pension reforms introduced in April 2015 have granted those aged 55 and over greater flexibility to use their pension pots like bank accounts, with the ability to withdraw thousands of pounds to save, invest or spend as they choose.

Whilst this can provide an opportunity for people to grow their retirement savings by placing their money in a range of potentially lucrative investments; for many these reforms have left them vulnerable to being a victim of fraud and/or mis-selling, when transferring their pension.

In October, the police revealed that pensioners have been defrauded of £18 million in the past year.  This figure is nearly double that of the previous year.  However, despite more than 2,000 cases of pension fraud being referred to the police in the past three years, just seven people have been charged.

The Financial Services Compensation Scheme has stated that SIPP-related pension claims have increased by 59% this year, which mostly relate to pension transfer advice. People’s monies are usually transferred to high-risk investments, including overseas property, overseas hotel resorts, and palm oil plantations, through the use of a SIPP. These investments are usually unregulated thereby offering people limited avenues for recourse if they suffer substantial loss.

People of all ages are being targeted. Victims under the age of 55 are also being targeted and are now receiving letters from HMRC demanding repayment of up to 55 per cent of the amount withdrawn from their pension, even where the individual has been the victim of a scam.

Steps being taken to entice you

People are being coerced to invest in “once in a lifetime opportunities“, tricking people into parting with their life savings, often through the use of persistent cold calling and the offer of:

• free advice;
• no obligation pension reviews; and
• high investment returns of 10-15%.

More often than not, these offers are “too good to be true” and a great deal of pressure is being put upon people by saying that the offer will not last for very long.

Many of those who have taken higher risks with their pensions have found that the value of their investment has significantly diminished, often leaving them with no pension pot at all.

What to look out for?

• Do not feel rushed or pressurised into making a decision. You are entitled to take time to consider whether the advice is the most appropriate advice for you.

• Always be wary of a “cold caller“.

• Before taking advice from a financial or pension adviser check to see if they are regulated by the Financial Conduct Authority (FCA). The FCA is the regulating body which oversees firms and individuals who provide financial advice.

• To check to see if someone is regulated, log onto the FCA website: https://www.fca.org.uk/.

• Click on the tab “Financial Services Register” and type in the person or the firm’s name. The results will show whether the adviser is regulated or not. If the adviser is not listed on the register, the FCA will not be able to assist you if you are defrauded out of thousands of pounds worth of savings.

• Carry out internet searches against the firm and individual can provide an insight into the service previous customers have received and, importantly, highlight any particular issues or problems that others have faced.

• Review the government’s free guidance service called Pension Wise, which is available for over-55s.  The guidance offered is limited, but can help individuals to understand the warning signs and avoid falling victim to a scam should they be targeted.

• Speak to Herbert & Webster prior to considering any pension transfer.

Going forward

There are plans to ban cold-calling in respect of pensions, and impose a fine of up to £500,000 on people who are taking advantage of the changing landscape since the reforms.

There are also plans to give pension firms more powers to block suspicious transfers, preventing people’s life savings from being transferred without any checks.  This should reduce the chance of fraud and/or mis-selling occurring.  Of course, banning cold-calls is unlikely to stop scammers, but individuals would be more likely to put the phone down if they were aware that cold-calling was illegal.

The steps that the government proposes to take are due to be uncovered in Budget 2017.  Until then, if you are considering investing your pension pot it is highly recommended to seek advice from a reputable, FCA regulated financial adviser, such as Herbert & Webster.

What to do if you have lost money?

Contact a solicitor to ascertain what remedies you may have. At Harrison Clark Rickerbys we have a specialist financial services litigation team. We advise clients on possible routes to recovery, in the event that they have been a victim of fraud and/or have lost monies in their pension.