You may remember the 2014 budget, where the Government announced that pensions freedoms would be introduced, to start in the 2015/16 tax year. Lauded as a great step forward, it allowed savers aged 55 and over the legal right to move their money; taking the whole amount as a lump sum and paying no tax on the first 25%, with the rest taxed as if it were a salary at their income tax rate.
Whilst this may have been a great step for freedom of personal finances, like with any great step, unfortunately, there have been people who have sought to exploit it.
Pension fraud has reached near crisis levels. It’s thought that around 250 million cold calls are made in Britain every year – that’s enough for 8 every second. Too many of these fraudulent cold calls are successful as official figures have revealed that in the last three years, pensioners have been conned out of £43m, with the average victim losing £15,000.
Thankfully, the Government has now confirmed that it will introduce a ban on cold calls by June, in an attempt to halt the flow of pension money into the hands of these fraudsters. However, whether this ban is enough to actually stop the scammers is something that is being discussed and doubted by experts.
Tom Selby, of the personal pension firm, AJ Bell, has said that “the ban sends a clear message to people that if they receive a cold call about their pension, they should simply hang up the phone.”
“However, the reality is scammers are becoming increasingly sophisticated and in the time it has taken policymakers to introduce this ban, tactics have evolved. We have always said a cold calling ban should be viewed as the beginning of the onslaught on pension scammers and we urge the Government and regulators to consider further interventions to protect savers.”
One such suggested intervention is to create a “permitted list” of safe pension schemes, so cash can only be released to pre-approved funds.
Ultimately, the scammers will continue to scam and savers have a legal right to move their money into any scheme they wish which, sadly, may include fraudulent and high risk ones. The ban will raise awareness of the risks, but the best way to stay protected is to always be on your guard.
If you have any questions around this topic, please feel free to get in touch with us directly.