You may have seen quite a lot about pensions in the news lately as the government has introduced changes to how people can access the money in their private pension pot. Instead of only being allowed to take a quarter of their pension as a lump sum, as of 6th April 2015, retirees can, if they wish, take out up to 100% and do what they want with it (only 25% will be tax free). You can read more info on the changes here.
With the new freedoms coming into force,Age UK have warned that people over 55 could be targeted by fraudsters carrying out a range of scams. So, with that in mind, it’s a good idea to prepare yourself so that you can try and prevent yourself becoming a victim. Here are some of the tell-tale signs:
Out of the Blue… If a company you’ve never heard of texts or calls you out of the blue proposing that you release funds early out of your fund, be suspicious.
Too good to be true… As the saying goes, if it sounds too good to be true then it probably is. The Pension Advisory Service warns that victims will be offered benefits that aren’t available in reality. For instance, a scammer may promise someone that they can gain access to their pension pot before the age of 55, so be wary.
Under Pressure… A reputable company will explain everything to you clearly and give you all the time you need to make a decision. If the company suggests sending the documents round by courier the same day so that you can sign as quickly as possible or puts you under pressure to agree, be suspicious.
We’re part of a Government Review… Scammers will sometimes say that they are part of a Government review or initiative and you should be very wary if this is mentioned as there are no Government reviews being carried out at the moment.
Overseas transfer… Be wary of a company that suggests you transfer your money overseas. A scam may promise extra tax savings because they’ll invest your money in overseas ventures. This can sometimes be a tactic to make it harder to actually track the money down when it is released and you realise that you’ve been scammed.
Legal Loophole… The age that you’re currently allowed to draw money out of your private pension is 55. If any company tells you that they’ve found a way around this then beware. Of course, there are some schemes that do allow you to draw money out before you are 55, but be very careful of providers offering this. You don’t want to be left with a tax bill once the money is released if your provider has broken any rules.
The financial watchdog, the FCA, has produced this useful guide to help people keep their pensions safe – and it is also worth checking its ScamSmart site. Another useful resource is the ScamSmart Action Fraud website, which is also the site you use to report fraud should the worst happen.