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The pension scams you need to know about

A rise in pension fraud has led to the creation of a new taskforce, but savers also have a role to play in protecting their cash.


by Michelle McGagh on Aug 20, 2012 at 10:07

The pension scams you need to know about

An increase in pension scams has spurred regulators, government departments and the Serious Fraud Office (SFO) to create a new taskforce to tackle the problem. But you can also play your part to stay ahead of the fraudsters and keep your retirement money safe.

‘It’s been an area that is ripe pickings for fraud,’ said Jane de Lozey, joint head of fraud at the SFO. ‘Pensions are complex and have a mystery to them. People don’t understand them and this leaves them open to abuse.'

GP Noble: 'smash and grab' fraud

De Lozey knows all about pension fraud as she worked on the GP Noble case – one of the most high-profile pension fraud cases in recent history. The case started four years ago, and has so far spawned three criminal trials and one civil trial, with another trial due for October. So far £30 million has been recovered from the £52 million GP Noble fraud.

Of the GP Noble fraud, de Lozey said: ‘It was eye-opening to see how easy it is to commit pensions fraud. GP Noble was a smash and grab fraud, the equivalent of ramming into an ATM machine – it showed how easily you can steal other people's money.

‘The GP Noble fraud is straightforward compared to what we are seeing now. Fraud has been elevated now in terms of complexity.’

New taskforce

It is because of this increased complexity that the SFO is helping to set up a pensions fraud taskforce, working alongside the Department for Work and Pensions, HM Revenue & Customers, the Economic Crime Council, the Department of Business Innovation and Skills, the National Crime Agency, The Pensions Regulator and the Financial Services Authority (FSA).

‘The joint taskforce will specifically target pensions, because we have seen an increase in the number of fraud cases with a pensions angle, and the self-invested personal pension (Sipp) angle has increased a lot in the last year,’ de Lozey said.

Suspect investments

As Sipp savers have control over what they can invest their money in, the fraud often centres on investment. People are encouraged to invest their pension schemes in high-risk investments, many of which promise returns they cannot deliver.

The SFO has seen an increase in overseas property development fraud, with savers encouraged to invest in everything from hotels to golf courses and student accommodation.

Bio-fuel and sustainable energy investments are also being marketed at Sipp investors as a reliable investment for their pension pot.

‘Some of these investment are offering 16% returns – this should set the alarm bells ringing. Also, anything that says income is guaranteed,’ said de Lozey. ‘We see claims that money is guaranteed because it is held in escrow accounts. It is our experience that these claims do not stand up.

‘If something is too good to be true, then that is usually the case.’

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20 comments so far. Why not have your say?

Chris Clark

Aug 20, 2012 at 13:14

What about the pension investments marketed as low risk, authorised by the FSA and risk managed by Capita, the ACD, Like, for example, the CF Arch cru scandal. How do you avoid getting scammed by those?

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Aug 20, 2012 at 13:23

Fraud and corruption of any kind is a blight on society, and those that commit it need to be rooted out and prosecuted with the full force of the law. This is a subject close to my heart because I am currently considering drawing my pension from my SIPP.

The challenge for regulators is that fraudsters cross departmental and national boundaries, and the investigation case management systems used by the regulators are not sufficiently functional to address the siloed nature of fraud and corruption investigation... until now.

We have been collaborating for 18 months with the international financial institution leading the global war against corruption, to create the most advanced Fraud Investigation Case Management Solution available.

We are in discussions with a number of like-minded international financial insitutions, and would love to have a conversation with the SFO, because we know our solution really can make a difference, it can be deployed quickly, and the cost won't break the bank!

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Aug 20, 2012 at 13:53

Fraud is increasing because perpetrators are punished far too leniently. Often the fine is much less than they have stolen and imprisonment is nominal. A 2 yr sentence for a fraud of £80 mln is laughable, when we gave 3 yrs to a young single mother who carried off a TV from a shop in a pram, at the recent London riots.

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Aug 20, 2012 at 14:41

Biggest scam to date was Law Lords' scandalous decision that lead to the bankruptcy of Equitable Life.

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Aug 20, 2012 at 15:32

Sounds like the same sort of pension scam the Government loves to perpetrate. Promises people pensions at 60 for women and 65 for men and then moves the goalposts 30 years down the line when you were least expecting it having paid your NI contributions. Also always promised RPI uprating and when that proved too much reduced it to CPI. No doubt there are other tricks the Government has up its sleeve.

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sparky 64

Aug 20, 2012 at 16:35

The biggest fraudsters of all are the pension fund managers and the annuity providers. Its about time we pensioners had more say with regard to our money and more access to it instead of being constantly ripped off. Who in their right mind would invest in a private pension; I know if I had my time again I would do the investing as I can get a better return myself; even without the tax releif. They are nothing but parasites living off your money and even charge when they loose you money and thats legal.Ha bloody Ha

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Aug 20, 2012 at 17:24

Imagine 1000 males at 65 approached you with a bundle - £100k each and said you could keep this if you paid them £6000 ea for the rest of their lives – 5yrs on average? So on average you will shell out £30000 (to each person). How long would it take you to snatch the money out of their hands and make £70,000 per person, less a bit for admin? On top of this gain you invest the initial cash, say in building societies and get a return of 4% (initially on £100k pp) but lets base it on £70k ie another £2400 pa – for ever and a day.

Dick Terpin did worst (stole less ) than this! Why do we allow them to get away with it?

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Aug 20, 2012 at 17:31

I have nothing good to say about this industry. My own experience has been dreadful and I loathe them. They profit out of people's efforts and lifetime savings, are rarely if ever accountable for their performance or huge charges and I include in this, not just the fund managers, but the independent trustees, and administrators. They do everything in their own time, change their minds, get facts wrong, blind you with legal jargon and pension speak, deplete your fund, and walk away untouched. And what can you do about it as an individual, who do you appeal to fight your corner - no one, because they are so well protected.

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Aug 20, 2012 at 18:15


Not only do we allow it, we have laws forcing people to accept it..

It is hardly credible.

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Aug 20, 2012 at 19:03

Sparky 64 Surely you have heard of a SIPP (self invested personal pension). You make your own investment decisions from a wide range of possibilities and manage your own investments. Who in their right mind wouldn't invest in such a personal pension. Then when you wish to take an income from it, keep it invested and go into drawdown. No need for an annuity if you don't need the guarantee of a life long minimum income.

Only victims; the naive, lazy and the stupid get ripped off. With a small modicum of common sense you can avoid most pitfalls.

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Aug 20, 2012 at 19:09

Ripped Off you certainly aren't an actuary and if your 1000 imaginary 65 year old retirees only have five years each left in life expectancy then they are all seriously ill and would be able to obtain an enhanced or impaired annuity at anything up to and even over 10% per annum.

I am not an actuary but with mortality drag I think you will find the average 65 year old male is more likely to enjoy his 80th birthday than to flee this mortal coil by his 70th!

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Aug 20, 2012 at 19:16

Franco, you don't have to buy an annuity until you are 75! According to your fellow 'Mr Angry' aka Ripped Off you will have been dead for five years by then so it shouldn't matter to you anyway! You want the tax relief on your retirement savings you accept the rules which have become more, not less, flexible in recent years.

The biggest pensions rip off of all time came not from insurance companies and pension providers but by Gordon Brown in 1998 when he removed corporation tax relief on pension returns at a cost then of over £5 billion per year and for every year since.

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Earny Madoff

Aug 21, 2012 at 08:37

Sounds a bit like Mus and Mark!

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Aug 21, 2012 at 12:14

Sinic, I am not an actuary but I guess you are in the trade.

Most will accept my example figures for what they are - demonstrate the daylight robery by fund manager, advisors etc (tax is another matter). Individuals can go on line and get an idea of life expectancy. Even if I accept your figures-which I dont- the profit pp is reduced by £30k. Obviosly, the trade doesnt regard taking (the reduced!) 40%+ as stealing.

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Aug 21, 2012 at 15:23

Ripped Off, I am not in the trade, but I made it my business to manage my own retirement investments myself and therefore avoided excessive costs. Current legislation relating to retirement investments permits the investor to manage his own investments at a realistic cost. That is a fact! If an individual is too naive, lazy or stupid to do so that is their problem not the advisor's or pension provider's.

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Aug 21, 2012 at 17:57

Ripped Off, A simple internet search tells me, and you, if you had been bothered to look, that the average life expectancy of a 65 year old man is a further 18.4 years, or to the age of 83.You would therefore have been wise to have accepted my figures. Your imaginary 1000 65 year olds are far more likely to enjoy their 80th birthdays, than a funeral at 70!

Your sample figures, being fundamentally flawed, illustrate absolutely nothing, except that those who don't check their facts and figures are invariably the ones who feel that they are ripped off!

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Jerry Jones

Aug 22, 2012 at 10:38

Fag-packet calculation:

Let's assume average life expectancy of age 85. 6% return for 20 years is 120%, so the annuity provider has to add 20% to the money they were given at the outset. Let's assume they can invest it at 3%. By year 20 they have £17k left in the pot so at year 23 (age 88) the original pot has run out.

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Aug 22, 2012 at 12:26

Pointless trying to work out your annuity based on projected ROI on pension pot x years left to live. If you do decide to go the annuity route, you take what the provider offers. You have few choices, but definitely choose the Open Market Option, which will allow you to compare annuity rates from different insurers. Do not immediately go for what your pension provider offers.

If you opt for e.g. 25% tax free lump sum (take it while you can enjoy it!), a zero guaranteed period, RPI annual increase, with no payment to spouse when you die (Mr Selfish!) - the approx annuity on £300,000 is between £7.1K - £7.8K (don't forget tax). Awful if you die after just 5 years, and you need to live for at least 25 years after taking out the annuity before you are in profit! Include a spouse/dependent payment, and your already small annuity will be reduced during your lifetime. Annuities are not pretty!

However, if you can survive for at least 25 years on annuity, it's milk and honey all the way! Your provider must pay regardless.

When you die, there is no remaining 'pot' for your beneficiaries.

Personally, I will look at Drawdown. It may or may not give me a bigger annual amount, but I am in control, and anything left will go to my beneficiaries (subject to 55% tax I believe).

However, with something this important, I will take professional advice.

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Paul Eden

Aug 24, 2012 at 10:00

Saving for retirement starts long before retirement and investments I have come across offer wonderful returns and are billed as low risk...are these 'too good to be true' investments to be disregarded because the are so good?

I am thinking here of fine wines or carbon buying or whatever the proper terms are. Is there security in these investments? It seems that retirement saving can be derailed at every stage. I don't know what can be trusted and what can't.

Are the only safe investments those that pay next to nothing? In which case we will have very little for retirement anyway.

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Aug 24, 2012 at 11:12

Equitable Life sold with profits annuities, a product that transfered the investment risk from the Company to the Pensioner which was entirely against the principle of annuities i.e. that they are safe.

They were allowed to do this for my years by the FSA and its predecessors before it all came to grief. These annuitants now receive half of what they would be if they had bought a conventional annuity.

Limited compensation by the Government is still awaited by thousands. Nobody has been prosecuted, nobody is in jail, nobody is responsible

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