Pension liberation fraudsters are ruthlessly targeting retirement savers in their 50s, according to new research.
The scammers are exploiting a lack of knowledge about the age when the over 50s can access their pension cash as the study by financial firm Fidelity shows two-thirds are confused about when they can take their pensions.
One in eight over 50s reported they had discussed taking money from their pensions with the fraudsters as a result of a cold call or unsolicited text or email.
Many of the fraudsters offer a ‘free government review’ of their pensions, which does not exist.
They were promised more than 25% of their pension savings tax-free or early access to their funds.
However, many potential victims recognised the scam from the start (61%), although 27% failed to realise they were being called by fraudsters and 12% trusted the advice the bogus advisers were offering.
Pension rights for the over 55s
Fidelity argues that the government and pension industry could do more to thwart scammers by offering clearer advice to the over 50s about their pension rights.
Pension rules say that anyone aged 55 or over with small pot defined contribution pensions – typically less than £10,000 – can draw up to £30,000 cash now. They pay no tax on the first 25% of the combined value of the funds and then income tax at their marginal rate on the rest.
From April 2015, the easy-access rules open to any defined contribution pension for retirement savers aged over 55.
The research found not all over 50s are sure of their pension options:
- 3% believed they could take the money at any age
- 10% thought they could have the money from age 50
- 41% believed they had to be older than 55
- 13% considered they had to wait until they were 65
- 18% thought they had to wait until their state pension age
- 15% had no idea when they could access their money
Pension liberation fraudsters focus on this confusion and offer to arrange pension transfers so retirement savers can take their cash.
Tax penalties
They fail to reveal that they charge a fee of up to a third of the value of the pension pot for their service and fail to tell their victims that if they are under 55, they face a 55% tax charge or if they are 55 or older, they can make their own arrangements without a charge.
Fidelity Worldwide Investment retirement director Alan Higham said: “While fraudsters have always tried to steal 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 are frustrated when they view providers as ‘holding on’ to their money unfairly. Fraudsters capitalise on this sentiment, encouraging consumers to hand over their savings without fully understanding the tax penalties incurred.”
