As research shows fraudsters targeting people under-55 and encouraging them to access their pension early is on the increase, Which? investigates some of the causes.
City of London Police figures show that in the 12 months to February 2016, £13.2 million was lost to pensions liberation scams – an increase of 26% on the previous year.
Pension liberation schemes target people under-55 and encourage them to withdraw or transfer their pension savings. However, pensions are designed to only allow savers access to their money after they turn 55. Accessing pensions savings before 55, unless in exceptional circumstances such as ill-health, is not permitted and consumers face losing up to 70% of their pot as a tax penalty.
And yet we found that companies offering early pension release for those under-55 are clearly advertising their services online. These sites offer early access to pension savings, potentially exploiting consumer confusion with the new pension freedoms, and don’t explain the huge losses at stake, often charging exorbitant fees.
Many of these sites, which could potentially be scams, also appear prominently when searching online for phrases such as ‘cashing in your pension’ and could be contributing to an increase in pensions liberation scams. The Financial Conduct Authority has issued a clear warning to savers about opting for early pension release, but adverts for early pension release often downplay the risks.
Which?’s ‘Safeguard us from Scams’ campaign calls on businesses, regulators and the Government to do more to protect consumers from online scams. As part of this work, we have asked Google to work with the Financial Conduct Authority to stop firms targeting consumers through misleading online adverts.
Alex Neill, Which? Director of Policy and Campaigns, said:
“Pension scams are a worrying problem and are costing savers millions of pounds. Unfortunately, criminals will always find ways to try to target your money and it’s hard to tell the difference between the genuine and the dodgy online adverts.
“Even the savviest people can be scammed by fraudsters, so it’s critical the Government, regulators and businesses redouble their efforts to protect consumers from these scams.