A lifetime’s savings lost in a moment

24 July, 2014 | News Releases

Press Release on behalf of The Pensions Regulator

Victims of pension scams have warned of the devastating impact of losing thousands of pounds in retirement savings as part of a hard-hitting campaign to help tackle the problem.

They have spoken out in a bid to prevent others from being enticed into trying to access their pension pot as a lump sum or loan before age 55 without understanding the tax penalties – or from being scammed into moving their retirement savings into unregulated high-risk or bogus investments that could result in them losing their entire pension pot.

The known amount of funds paid into pension scams now stands at £495m in total. However, it is suspected that this amount is likely to be substantially higher and not all activity is reported.

One woman, whose 40-year-old son took his own life after never receiving a promised £17,000 lump sum following the transfer of his £42,000 work pension, said: “I don’t want other mothers to suffer what I’ve been through, and what my family has been through.

“No matter how desperate things get, don’t be tempted to cash in your pension. Don’t do it – the people behind these scams are rogues who exploit people’s vulnerabilities.”

Another 49-year-old scam victim, who is potentially facing an £18,000 tax bill and risks losing her home after falling victim to a ‘pension loan’ scam said:

“These scams target vulnerable people. I feel very angry that I have been misled. Ignore the sales patter, ignore the glossy websites, ignore the cold calls and text messages. Go to an independent financial adviser – speak to an expert.”

As part of the Government awareness drive, The Pensions Regulator has refreshed its ‘Scorpion’ campaign material to reinforce the message to consumers not to be ‘stung’ by cold calls, text message spam or website offers claiming to be able to help them cash in their pension. The regulator is urging pension trustees and providers to include the leaflet in the next annual statement sent to members, and anyone who requests a transfer in the meantime.

Pension scams may sound legitimate but there is a high risk that once members release their funds in this way, their money will be moved into dubious investment arrangements, often overseas and unregulated. Home visits from ‘introducers’, offers of ‘free pension reviews’, claims about ‘legal loopholes’ and unusual investments like overseas property, storage units or biofuels are all used to fool members into thinking they’re being offered a legitimate pension transfer.

Members are often not properly warned that if they access their pension pot before the legal minimum age of 55, they face high tax charges and those arranging the transaction will cream off a significant percentage as fees.

Pensions minister Steve Webb warned:

“Although quick-fix pension release schemes may seem tempting, particularly when times are tough, people should make sure they understand all the implications before they sign on the dotted line.

“A joint industry and Government operation is working to stamp out these unethical, exploitative, poor value offers – but I would urge anyone who is approached to think carefully, consider seeking advice and, if in doubt, steer clear.”

The Pensions Regulator’s executive director responsible for the regulator’s work to frustrate pension scams, Andrew Warwick-Thompson said:

“Pension scams remain prevalent and need to be stamped out. We have seen victims lose their entire pension savings by signing up to these offers. If you are approached by someone claiming to be offering advice or that they can help you move a frozen pension, don’t get suckered. You could be left with nothing for retirement, you will not be compensated, and you may have to pay fees and a high tax charge. The only people who benefit financially from the arrangements are the scammers themselves.”

Chief executive of The Pensions Advisory Service Michelle Cracknell said:

“Our helpline gets many calls from people who have been targeted by unscrupulous cold callers pressuring people into making irreversible and often irreparable decisions about their pensions savings. We also worry that many people who fall for these scams do not ask for help due to embarrassment. We would urge anyone that has any doubt about what they are hearing or what they have done to contact us.”

The Pensions Regulator can publish reports on its efforts to combat pension scams, and expects to report in the coming months on the outcomes of a number of its concluded investigations.

The new campaign is being led by the Department for Work and Pensions, The Pensions Regulator, The Pensions Advisory Service, Money Advice Service, Financial Conduct Authority, Serious Fraud Office, HMRC, Action Fraud, National Crime Agency and City of London Police.

Visit http://www.thepensionsregulator.gov.uk/pension-scams for more information.

If you fall victim of a pensions scam please report it to Action Fraud 0300 123 2040 www.actionfraud.police.uk

For impartial information and guidance on pensions contact The Pensions Advisory Service at 0845 6012923 www.thepensionsadvisoryservice.org.uk

Notes for Editors

1. Common features of these scams include:

Unsolicited ‘spam’ text messages
Transfers overseas
Access to pension before 55
No member copy of documentation
Member encouraged to speed up transfer
Phrases like ‘legal loopholes’, ‘cash bonus’, ‘government endorsement’.

2. The Government has this week set out plans to enable people to take more than 25% of their pension savings as a cash lump sum at age 55. This will not come into effect until April 2015, and even then tax will be payable at the individual’s marginal rate of tax.

3. If you take money out of your occupational or personal pension plan early, this will normally be an unauthorised payment. Unauthorised payments will be subject to tax charges – these tax charges can be up to 55% of the value of the payment for a scheme member and at least 15% of the value of the payment for the scheme administrator. If you fail to tell HMRC, you may be charged penalties.

4. The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).

Press contacts

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Cat Dean – 01273 662019

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