A year ago in April 2015, “the biggest change in a century” to private pensions happened. Consumers were given greater flexibility over how they access their pension savings. The ability to choose is welcome but there are risks attached in the form of new scams.
Citizens Advice has just published a report ‘Too Good to be True?’ that shows how pension scams and unsolicited pension contact has changed since the freedoms.
Before April 2015, pension scams focused on investments and early access (liberation scams). Since then more people have received calls that offer “reviews” or “advice”. These calls have similar aims as liberation scams.
Citizens Advice estimates that 10.9 million people have received unsolicited contact about a pension since April 2015. A total of 3.8 million of these people are over the age of 55, and eligible to use pension freedoms. There is much confusion around the legitimacy of these calls, as contact out of the blue could be from scammers or lead generators that work from legitimate businesses. Such confusion can both reduce consumer advice and make it harder for people to spot scams.
Research revealed that 76% of people felt confident that they would spot a pension scam but, when tested by Citizens Advice, 88% picked an offer containing pension scam warning signs. They tested 2,000 people. Most worryingly, of those who said they were confident at spotting a scam, 87% selected one of the scam offers.
Falling victim to a pension scam can be devastating. Following years of saving, consumers can be conned out of all their private retirement income. This can make the difference between a comfortable and an impoverished retirement.
Tackling pension scams needs to be a priority for pension firms, financial advisers, government, regulators and consumer bodies.
Report pension scams to the Consumer Helpline on 03454 04 05 06.