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Pension fraudsters change tack after Budget reforms

So-called pension 'liberators' recycled their scams within hours of new pension freedoms being introduced in the Budget, say experts. 


by Michelle McGagh on Jun 16, 2014 at 15:47

Pension fraudsters change tack after Budget reforms

The Budget heralded a new era for pensions, ending the need to buy an annuity and giving people access to their entire pension from age 55. It had been hoped the new flexibility would put an end to pension 'liberators', who try to con savers out of their pensions. Unfortunately, experts are concerned the scammers have refocused their efforts elsewhere.

Previously pension liberation scams had offered savers the chance to take out their entire pot at once and to take it before age 55. While this is not illegal the fraudsters often charge a large undisclosed fee and failed to tell those using the schemes they would be hit with a large tax bill. In the worst case scenario the liberators would run off with the entire pot.

The Budget changes have made pension liberators’ scams more difficult to operate because the rules around accessing pensions are more transparent but pensions experts are worried liberators have moved to new types of fraud.

Jamie Jenkins, Standard Life head of corporate strategy and propositions, said liberators had ‘reinvented’ themselves as overseas investors. ‘I saw one example of a company that said: "Have you heard about George Osborne’s Budget? Now you can take all of your money out [and invest it with us]",’ he said.

Although this particular company said those accessing their entire pot would pay a large tax bill, it reassured them that ‘we will more than compensate for the tax you pay by investing in overseas property schemes’. Jenkins said whilst it may have been a legitimate investment opportunity, he ‘would not bet [his] life savings on it’.

Margaret Snowden, director of pension administrator JLT Employee Benefits and leader of a pension industry group trying to clamp down on 'liberators' said the fraudsters still posed a threat to consumers. She has also seen a shift in the way these groups encourage consumers to take their entire pension as cash and invest it in high-risk investments.

However, she said it was difficult for the Pensions Liberation Industry Group (PLIG) she chairs to identify these operations as it was tasked with locking down pension liberation and was not responsible for judging whether investments were a good or bad idea.

‘It is quite difficult for a group like ours to talk about what is a good and what is a bad investment,’ she said. ‘If someone is investing in mango trees in Malaysia, to one person that is a good investment and to another than is a bad investment.

‘We want to raise awareness for those who are being asked to transfer [out of pensions] early to make sure they get proper information before they transfer their money anywhere,’ she added. 

Quick off the mark

Snowden said the problem with pension scammers is the speed with which they work and noted that ‘within hours’ of the new pension rules being introduced new schemes trying to convince people to hand over cash had been established.

The City watchdog, the Financial Conduct Authority (FCA), was forced to put out a warning at the end of May highlighting a new scam that had launched on the back of the ‘guidance guarantee’ announced in the Budget.

Cold-callers were already found to be targeting savers claiming to be from the Department for Work and Pensions offering a ‘free pension review’ as part of the guidance guarantee and the promise of ‘better returns’ for investing their cash. The FCA told individuals to ‘hang up the phone’ if they received one of these calls as the companies were not authorised by the regulator.

Jenkins said although the promised returns from scammers may seem attractive they were usually too good to be true. ‘These people tend to respond to changes in the Budget more quickly than legitimate, established companies. They are recycling their scams,’ he said. ‘I can see how [the scam] would be attractive to some people…But there is a risk of going along with the person who speaks to you most convincingly.’

7 comments so far. Why not have your say?


Jun 21, 2014 at 12:37

Simple. Pensions should not be accessible before the age of 55.

And scammers should be punished by confiscation of their assets. But these things will never be implemented because the scammers are our rulers' friends.

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Earny Madoff

Jun 21, 2014 at 14:26

Mark & Mus up and running again!

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Tony Peterson

Jun 21, 2014 at 17:39

If the new rules had been in place in 1996 when I definitively retired, I would be considerably better off now. I am pleased that annuities are no longer compulsory, and self select pensions and drawdown make for a much fairer system than that which obtained when I was forced into a rubbish annuity.

I am not complaining. The tax free quarter I was allowed control of now pays me somewhere between ten and twenty times what the annuity payments are now, from the equity and other investments I purchased with that 25%.

I agree with Franco that not enough is being done to bring these scamming cold callers to book. I am currently in discussions with the Information Commissioner who runs an office which seems to me to be colluding with scammers. I'll let you know how I get on.

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Jun 22, 2014 at 20:19

Pity the same rules do not apply to the government in respect of the State Retirement Pension.

Contribute to the NI Scheme on the same terms and conditıons as everyone else when working but in retirement find one's pension is frozen.

Automatic index linking for residents in the UK, EEA and some sixteen random select countries like Turkey, Israel, the Phillippines and the good ole US of A but retire in Canada, Australia, South Africa or Thailand and no uprating evermore.

Now taking contributions which have earned qualifying years for a pension and then not paying out on the same scales because of where one lives is, to my mind the real pension fraud............Pension Fraud by HM Government

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George Morley

Jun 22, 2014 at 21:51

I could'nt have put it better myself RobtheFox and I would bet that most of them paid in for the full 44 yrs unlike the recent reduced qualifying time as I did.

Unjust and immoral - I'm talking about the policy and the politicians..

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Jane Davies

Jun 22, 2014 at 23:50

For pension fraud see the UK DWP. They have defrauded 4% of state pensioners for decades and yet they are never called out for it. Liars, hypocrites and cheats spring to mind. They bang on about welfare cheats without batting an eye, all the while they are guilty of it themselves.

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Justin Forawurd

Jun 23, 2014 at 04:20

RobtheFox; George Morley; and Jane Davies have said the truth. The government hides behind it's own legislation as it commits fraud in the name of Great??? Britain.

The Pension Bill is now law, and Clause 20 of that Bill contain the words that punish 4% of the UK's pensioner population with a frozen pension purely because of where they live.

Fraudsters (when caught) get convicted. This government doesn't!

Clause 20 is grossly unfair. Is it against the law?

Clause 20 is completely immoral. Is it against the law?

Clause 20 is hugely discriminatory. Is it against the law?

Clause 20 is totally unjust. Is it against the law?

The answer to all those questions, and more, is no, because Clause 20 is the law. A very bad, disgusting law that the UK should be thoroughly ashamed of - that her Majesty the Queen should be ashamed of signing into the statute books, especially when she so outspokenly supported doing away with the very thing that Clause 20 perpetuates - discrimination by a Commonwealth government - namely, her own!!

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