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New campaign targets pension fraud

A hard-hitting information campaign for consumers and pensions professionals has been launched by the Pensions Regulator, as part of an on-going multi-agency crackdown on predators claiming to be able to release pensions cash as a loan or lump sum before the law allows.

The perpetrators often work alongside 'introducers' or 'advisers' who try to entice the public with spam text messages, cold calls or website promotions into transferring their existing workplace or private pension with the promise of being able to release a portion as cash before the age of 55.

People may be misled or not properly informed that tax charges and fees can erode their pension pot by more than half, leaving them with little to live on in retirement. The remainder of their funds are likely to be invested in highly dubious and risky, unregulated investment structures, often based overseas. The amount that has been 'liberated' from pension schemes in this way is known to be in the hundreds of millions of pounds, with thousands of members affected.

Warning signs

Accessing your pension before age 55 can result in an "unauthorised payment" which can attract significant tax charges and penalties. On top of administration fees, total charges can amount to more than half of the amount transferred. Additionally, taking money early means individuals will be poorer in retirement.

Things to look out for:

  • Being approached out of the blue over the phone or via text message.
  • Pushy advisers, often unregulated, who claim to be able to help you access your pension before age 55.
  • Companies that offer a 'loan', 'saving advance' or 'cashback' from your pension.
  • Any reference to 'loopholes', overseas investments, creative or new investment techniques.

The Pensions Regulator has worked with other agencies to produce information, carrying distinctive scorpion imagery, illustrating the threat to people's pensions if they are taken in by such offers. The new information includes:

  • A warning insert that administrators and pension providers will be asked to include in the information they provide to members who request a transfer of their pension. The insert can be viewed here.
  • A more detailed information leaflet for members of pension schemes looking to understand the consequences of these offers, which can be viewed here.

Steve Webb, Minister for Pensions, said:

"Money in a pension is there for retirement and should not be released before at least the age of 55. The Government is investigating a number of schemes where firms appear to be preying on people when times are tight, and I am working closely with The Pensions Regulator to ensure rules are not being broken."

The Pensions Advisory Service's chief executive Marta Phillips said:

"Although it may be tempting to release cash from your pension early, schemes presented to you, particularly if you are under age 55, are unlikely to be legitimate and you will incur a large tax penalty. In addition, our experience is that you are also unlikely to ever recover the balance of your funds. Therefore, if it sounds too good to be true, it usually is."

Contact

If you think you may have been a victim, or if you have information regarding pension liberation fraud, contact Action Fraud on 0300 123 2040.

If you, or someone you know, has been contacted about transferring a pension to another scheme and are concerned about whether it is legitimate, then contact The Pensions Advisory Service (TPAS) helpline for information and guidance on 020 7932 5791.

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