According to research1 carried out by Phoenix Group, the UK’s largest specialist consolidator of closed life funds, pension savers are almost three times more likely to be approached to review their pension or release some of it as cash than they were nine months ago, before the 2014 Budget pension reforms were announced. In addition, a staggering 45% of people with pension savings who have yet to retire have been contacted, either through unsolicited calls or messages sent via email or text.
Research commissioned by Phoenix found that of those targeted by pension scam schemes, one in ten (11%) considered contacting them and one in six (15%) said they went ahead and contacted the fraudsters as a result. This figure rises to one in five (19%) of 18-34 year olds and 35-54 year olds (18%). Worryingly, one in ten (12%) of 18-34 year olds have already released some or all of their pension as cash as a result of being contacted, demonstrating the vulnerability of this demographic to pension scams.
Phoenix Group says more needs to be done to raise awareness around the issue of pension fraud, so that consumers are aware of the options available. This will help to ensure they avoid making a mistake that could have major implications for their retirement savings.
Parminder Dhothar, Intelligence and Investigations Manager for Phoenix Group, said:
“The increase in aggressive targeting by pension scammers in the last nine months is very concerning; people can lose their life savings to these con men. Many unscrupulous businesses offer customers the opportunity to unlock their pension in exchange for cash, before they reach 55, and often without making them aware of the fees they are charging for this service 2. The fees can be as high as 30%. People are being deceived into making transfers into these schemes even though many people in defined contribution schemes will be able to access cash directly from their pensions from April 2015”.
Of those who do want to release money from their pension pot, almost a third (29%) indicate that they will consult an IFA but just under half (46%) will only seek advice from family and friends. A worrying 38% will go to free pension review companies online. Some pension review companies will be legitimate sources of information and help, but scammer sites are also hidden amongst these, often using clever and very professional looking marketing materials.
Parminder Dhothar continued: “Although the pension changes announced for April 2015 give much greater flexibility to pension policyholders, we’re finding that policyholders are uncertain about what the changes mean for them. Anyone thinking of benefiting from the changes should do some thorough research and not simply respond to a text message or cold call. As an industry, we’re continuing to raise awareness of this issue to ensure consumers are adequately protected”.
Phoenix is tackling the rise in pension scams by working with its partners to try and prevent transfers to suspicious schemes, and by getting the message out to customers. The UK’s largest specialist consolidator of closed life funds has so far prevented 1074 people from losing a total of £22.3 million in potential pensions fraud and expects to see more cases come in whilst these marketing practices continue to be used. Anyone considering freeing up money in their pension should read the pension scams factsheet at www.phoenixlife.co.uk and seek independent financial advice.
Phoenix does transfer pensions to legitimate pension schemes and belongs to the Origo Options initiative to aid this process. The average transfer time for pension to pension transfers is currently 10.9 days – against industry guidelines of 12 days or below.
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