Since 2015 savers aged 55 and over have been able to access savings from their Defined Contributions Scheme under the ‘pensions flexibility’ rules. This means that funds can be accessed as a Lump Sum Payment, Lifetime Annuity, Flexi-Access Drawdown, Capped Drawdown or Short-Term Annuities.
This relaxing of the rules has proven to be a popular development as HMRC figures show that over £30.7bn has been flexibly withdrawn since that time
However, with greater access to these substantial pots of money comes an invitation to criminals to take advantage and 2018 figures from regulator the Financial Conduct Authority (FCA), reported that victims of pensions scams lost an average of £91,000 each to fraudsters; with two people losing more than £1million.
In January 2019 the Government made all pension cold-calling illegal, including from legitimate firms. Only firms authorised by the FCA or who have an existing relationship with the recipient and who have explicit consent are allowed to do so. Those breaking the rules face fines of up to £500,000.
But criminals operating pensions scams are unlikely to be deterred by the threat of a fine, so what can you do to avoid becoming their next victim?
According to the FCA “scammers usually contact people out of the blue via phone, email or text, or even advertise online. Or they may be introduced to you by a friend or family member who is also unknowingly being scammed”.
“They will make false claims to gain your trust including presenting attractive offers to persuade you to release funds to them”.
Scams often include:
“If you’re contacted out of the blue about a pension opportunity, chances are its high risk or a scam” the FCA advise.
The FCA and The Pensions Regulator (TPR) have defined four key steps to give better pensions protection.
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