Around 300,000 retirement savers will fall victim to sophisticated pension scams when new flexible access rules come into force from April 6, 2015, says a new study.
The crooks will fleece 50,000 savers out of their entire life savings, while the rest will hand over a portion of their pension to the scammers, says a study by financial firm Hymans Robertson.
The study suggests a fifth of 5 million over 55s with the entitlement to draw money from their pensions will do so – and that these will be the main targets of the scammers.
The firm’s Chris Noon said: “Most savers lack an understanding of how the rules are changing and how the changes will affect their finances, which leaves them vulnerable to scammers.
“We know from how pension liberation has already hit the market that scammers are out their ready and waiting to grab as much money as they can when the rules change.”
£5,000 pension con
The scammers have an arsenal of tactics waiting for unwary pension savers, including texts to mobile phones, cold calls, letters and emails.
If they follow the pattern of pension liberation scams, millions will flood out promising free pension reviews and high return investments that either do not exist or fail to perform.
Pension liberation is offering to unlock pensions for the under 55s, who cannot access their cash without paying severe tax penalties.
In many cases, pension liberation advisers charged fees of up to a third of the value of pension pots or stole all the money.
The Financial Conduct Authority (FCA) has launched a scam-smart service for consumers and revealed the story of one retirement saver who almost lost £5,000 to crooks.
Cold call nightmare
“Fraudsters are well-versed in what they do so they sound knowledgeable and comfortable about bogus investments,” said an FCA spokesman.
“They go to a lot of trouble setting up plausible web sites, marketing materials and procedures. In many cases they may have worked as a genuine financial adviser, so know the industry jargon and procedures.
“However regulated financial advisers do not generally cold call people, so the chances are anyone that does call or message you out of the blue is a scammer. Our advice is to ignore them.”
The FCA has set up an online help centre for anyone suspecting pension scammers are trying to take their money.
Besides scammers, Hymans Robertson warn that the other big risks to pension savers are drawing out cash too quickly and paying too much tax, spending too much too soon and withdrawal charges imposed by pension firms.