Pension liberation scammers are picking up the pace in persuading retirement savers to move their lifetime savings in to risky funds.
Pension provider Friends Life claims the industry has seen the number of transfer requests from pension unlocking firms soar in recent months despite warnings from the tax man and financial watchdogs that the schemes are often frauds.
The firm confirmed receiving more than 500 requests from dubious financial firms to switch £12 million out of their funds.
All the requests were rejected.
Friends Life explained that pension fund managers scrutinise pension transfer requests to make sure they come from reputable firms – while any suspicious calls from suspected pension liberation firms are referred to HM Revenue and Customs for investigation.
Financial risk
“These transfers are often from unregistered funds offering no protection to consumers,” said a spokesman for the firm.
“This is worrying for pension providers and should concern customers, who are putting their future financial security at risk.
“The government and industry needs to take concerted action to protect pension savings and prevent another financial scandal.”
Pension liberation or unlocking supposedly offers retirement savers under 55 years old the chance to access their pensions early.
Except for in exceptional circumstances, the earliest a pension can be drawn is at 55 years old.
Many pension liberation firms cold-call or send spam emails promising to unlock pension funds, but the High Court ruled the schemes illegal last year.
The Financial Conduct Authority (FCA), Britain’s pensions and financial service regulator, has warned retirement savers against dealing with a firm offering pension unlocking services.
Fines and fees
HM Revenue and Customs has also ruled that any pension saver switching their fund to a pension unlocking firm is making an unauthorised pension withdrawal, which can attract a fine and penalties of between 55% and 75% of the transfer fund value.
Not only are pension investors likely to have lost their money to the pension unlocking firm, but they also face paying a fine for taking part in a scam, which can blow a massive hole in their retirement savings.
Many firms also charge significant fees for arranging a pension liberation transfer, which can also severely reduce the value of a pension.
The FCA reckons at least 50 pension unlocking advisers are sending thousands of emails and cold calls every week.
“These schemes become a fraud when the adviser fails to disclose the scale of fees and the consequences of a transfer,” said an FCA spokesman.