6 April 2015 is the date when the government’s radical pension reforms come into effect across the UK.
Boasting liberation of people’s pension pots, with flexible access to retirement saving funds and leading some to declare them a “death blow” to annuities, George Osborne’s speech at 2014’s March budget report has caused more confusion than outright celebration amongst both retirees and the financial services industry.
As Polly Toynbee wrote for the Guardian, “Surveys show people badly misjudge how long they will live, what inflation might do, and how much they will need. Announcing the free-for-all, George Osborne promised ‘financial advice’, but that’s not what people will get.”
Advice or Guidance
The distinction between guidance and advice has been a major factor in people’s confusion, with a recent report from Old Mutual Wealth declaring that out of the 939 people (45-65 years old) polled, three quarters of them have not taken any form of pension advice.
The predicted low uptake of the government’s Pension Wise guidance (not advice!) service may not be the success that it was originally deemed to be, and some may be caught out by making unadvised decisions.
Because of the increased confusion surrounding the freedoms, there are worries that retirees will be approached by fraudsters making claims of being able to “unlocking pensions” and providing “no-obligation pension reviews”.
Insurance provider Phoenix Group says that 45% of pension savers have already been contacted by these unregulated outfits, offering to help them to release their cash.
Spot the Scammers
For most people, offers of “one-off pension investments” or “unlocking your pension early” will result in the loss of most, if not all of their savings. In order to avoid a bogus pension scheme, here is a checklist of things to watch out for if you are approached by a potential fraudster:
- Phony Phrases – some of the phrases that these scammers use can be very convincing, and may sound official to those who aren’t entirely clued up. Be aware of terms such as ‘one-off investment opportunity’, ‘free pension reviews’, ‘legal loopholes’, ‘cash bonus’, ‘government endorsement’.
- Investment Opportunities – Many of the scams will be presented as investment opportunities, offering you a small percentage of your pension fund immediately for transferring your savings with the promise of higher returns later on. If you start to feel rushed, or are encouraged to speed up the transfer of money to a new scheme it is right to be wary. The investments may even be overseas, meaning the money becomes even more difficult to recover.
- Early Access to your pension – Only in very, very rare circumstances (usually life-threatening or terminal illness), will anybody be able to access their pension savings before the age of 55. Do not believe anybody who claims that they can do this for you.
- Unsolicited Contact – a lot of the time, potential victims of fraudsters are approached out of the blue. This could be over the phone, via text message or email, or even in person door-to-door. If you are approached unsolicited then always be aware.
Once the pension fund has been transferred, it is too late. Even if you do not lose all, or the majority of your pension fund, many victims will be subjected to large tax charges due to unauthorised payments or transfers.
The Financial Conduct Authority (FCA) regulates firms of financial advisers to ensure that financial markets work and consumers get a fair deal. They have recently launched their own ‘ScamSmart’ initiative to help pensioners to avoid being conned. If somebody approaches you, and you aren’t sure of their credentials, check whether they are regulated by the FCA. All professional financial or pension advisers can be checked on the FCA website:
At My Retirement Options, we only work with a dedicated network of FCA regulated financial advisers. We provide peace of mind that by requesting a meeting with an IFA through us, the local adviser we connect you with will have your best interests in mind.