Ever since the UK government introduced The Pensions Act 2014, incidents of pension fraud have been on the increase. The reasons behind the introduction of ‘pensions freedoms’ are both worthy and necessary. However, this has not detracted fraudsters from exploiting the legislation. Almost 2 1/2 years after the event, the government and regulator are still trying to paper over the cracks. For many victims the horse bolted a long time ago. The perpetrators of pension fraud need to be held to account.
Pension fraud and accountability
It is relatively easy for the authorities to identify those who have been involved in scams. Unfortunately very little has been done about it? The government-produced ’Scorpion booklet’, which accompanies all pension transfer documentation, fails to mention that no one has been prosecuted or even charged with pension fraud in the past. The problem lies with the tangled web of companies, legal structures and shadowy figures involved in running such schemes.
The ban on cold calling
The government have finally acted on cold-calling in proposing an outright ban. This is welcome news. However, as with any form of unsolicited telephone contact, it will be easy for scammers to get around this obstacle. By simply setting up call centres outside the UK, they can carry on as normal. There have been moves to encourage insurance companies, Self-Invested Personal Pension and Small Self-Administered Scheme providers to scrutinise transfers more carefully, and include additional warnings about scams within the paperwork. Once again this is unlikely to deter the fraudsters.
What is the solution?
That is the problem, but what is the answer? It would be best not to get involved in dubious pension transfers in the first place! Below is a 6-point plan that will help you avoid making bad financial decisions:
- Never under any circumstances respond to a cold call. Nothing good ever comes of them. Many other options are available in terms of properly qualified and reputable companies to discuss your pension needs with.
- If transferring your pension to a QROPS, you should never agree to have your money invested in unregulated investment funds. If you see the term ‘UCIS’ (Unregulated Collective Investment Scheme) used in fact sheets, steer well clear. Most investment failures in the past 20 years have involved UCIS funds. The old saying always holds true: if it sounds too good to be true, then it probably is.
- It is important to read all materials presented to you. You should also question anything that you don’t understand.
- You should reject propositions that claim to exploit loopholes, such as having access to your pension pot before the age of 55. There are genuine reasons for access to your pension before the minimum retirement age; this however depends on the individual’s circumstances and not general pension rules. Examples of extreme financial hardship or serious illness may qualify for early access;. However, HMRC need to approve each case.
- Sometimes it is best to walk away. Fraudulent salespeople can be very persuasive and will stop at nothing to get their hands on your money. You are under no obligation to complete business with anyone.
- Don’t leave it to the government and/or pensions regulator to protect you. They do have your best interests in mind, but their record of bringing fraudsters to account is poor.
Advice is at hand
It’s not all doom and gloom though. Most attempts at fraud start with a cold call; by not taking such calls you will steer clear of the problem. There is lots of information freely available on the internet that will help you avoid pension scams. There are also plenty of ‘tips’ that offer legitimate help with your retirement planning. Pensions can be a dry subject; they are however one of the biggest investments you will ever make. A good adviser can help you fully understand how they work.