Pension Freedoms and an Open Season for Scammers?

Posted by siteadmin on Friday 27th March 2015.

We are now only days away from significant changes into the way people can access their pensions.

On Monday April 6th the Government introduces the new world of Pension Freedoms, the biggest change to this part of the financial service industry in decades.

I discussed this in my last blog but it needs revisiting as I’m concerned about the potential for scammers to prey on people who don’t realise the full picture.

As an example, people with a pension pot of up to £50,000 are able to take decisions without the requirement of using a professional financial planner or adviser. Guidance is available but that's what it is, guidance. It is the DIY option I mentioned in the last article.

Thus, it’s been described by some in the media as having the potential to present an ‘open season for fraudsters’.

Recently I attended a financial experts’ forum where I had a conversation with the Pensions Minister, Steve Webb. He’s a switched on guy and instils great confidence with his knowledge. But even he admitted there was a big potential for fraudsters to exploit uncertainty.

The fear is that unscrupulous outfits will target people who are retired or soon to retire. I would envisage the typical style of cold calling that so many of us have been used to (similar to those ultra annoying PPI or Road Traffic claim calls), encouraging people to make the most of their new found freedoms by investing in a plethora of seemingly ‘to good to be true’ options.

The biggest risk people could fall foul of is by being taken in by the scammers who take their cut but leave the investor with large tax bills.

People may be seduced by the idea of utilising their pension pot in a quick, cheap and simple way. However, my genuine fear is that the seductive approach will descend into something which is laborious, very expensive and extremely complicated.

Interestingly, Mr Webb commented that even he had already received one of these such calls. So it will be interesting to see what happens over the next twelve months.

My guidance? Be very very careful!