30th September 2014
Fraudsters are targeting pension savers in alarming numbers as one in eight over-50s report that they have been approached by a firm that encouraged them to withdraw their retirement pot before the legal age.
This type of “pension liberation” scam could see victims lose their money if their savings are moved into high-risk investments and could leave savers with a tax bill of up to 70% of their fund for breaking HM Revenue & Customs rules.
The rules state that you cannot withdraw your pension savings before you reach 55, apart from in certain rare circumstances, such as in the case of terminal illness.
A survey by Fidelity Worldwide, the investment company, found that 61% who had been approached detected the offer as a scam straight away but, 27% did not, and a further 12% were interested in the proposal.
The research revealed that many do not understand the rules concerning access to retirement funds. After April 2015, anyone aged 55 and over can access all or some of their pension without any of the tax restrictions that currently apply.
Anyone below this age will still not be allowed to withdraw their funds.
Alan Higham, retirement director at Fidelity Worldwide Investment, said: “While fraudsters have always sniffed around pension savings, the changes set to come into effect next April have created some confusion among consumers.
“Some understand the rules as equating to immediate access without any caveats and can become very frustrated when they view providers as ‘holding on’ to their money unfairly. Fraudulent organisations have capitalised on this sentiment, encouraging consumers to hand over their savings without fully understanding the tax penalties incurred.”
Fidelity said that savers should never give out details to cold callers and should not be afraid to hang up. Alarm bells should ring if you are offered a ‘”free Government review”.
The Pensions Advisory Service can help if you have concerns about a firm.
Do not allow yourself to be pressured into a quick decision. Anyone telling you that you have to hurry so that you don’t miss a particular offer is unlikely to be acting in your interest.