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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
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.’
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.
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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