How to Protect Yourself from Pension Scams
In 2014, the Chancellor’s budget introduced significant reforms regarding traditional pension plan practices. Upon retirement age, you would have previously been able to withdraw 25% of your pension fund as a tax-free lump sum and invest the remainder in an annuity which would pay you an annual income for the rest of your life.
However, in accordance with new pension reform changes, anyone over the age of 55 now has the option to either follow the conventional pension practices detailed above. Alternatively, you will now also be able to take hold of your entire pension pot as a lump sum; with 25% of this lump sum being tax-free and the remainder being taxed at your existing income tax rate.
The introduction of these pension reforms has equipped pensioners with a wider range of choice regarding their retirement prospects. Unfortunately, these changes have also resulted in a significant increase in the number of fraudulent scams in operation which actively target pensioners.
By claiming that they offer people an early pension release or a viable investment opportunity to increase the value of their pension pot, these fraudsters have scammed thousands of unsuspecting victims out of these life savings. To avoid falling victim to similar nefarious schemes, here are our top tips on how to protect yourself from pension scams;
Identify fraudulent schemes
First and foremost it is important to identify as soon as possible whether a pension company is a fraudulent establishment. Fortunately there are several ways that you can do so.
Start by scrutinizing how they contacted you; did they cold-call you via phone, text, email or on your doorstep? If so, then it is highly likely that this company obtained your information via a third party and is a clear warning sign of a potential scam.
Moreover, as Auto Enrolment advise, always be wary if a company states that they are acting as part of an official body such as the Pensions Regulator. These official organisations will never contact you in this manner and as such the person liaising with you is doing so under false pretences.
Always carry out further research
Before you divulge any personal information to a pension company it is crucial that you carry out extensive research into their business practices. As matters stand, there are several online resources that you can utilise to do so.
For instance, the Pensions Advisory Service, the Pensions Regulator and Pension Wise are all established organisations which offer free, impartial advice regarding the various pension options at your disposal. Moreover, if you have been contacted by a pension company offering you an investment opportunity or early pension release then you should ask them whether their organisation is registered with the Financial Conduct Authority (FCA) and check their claims via the FCA website.
If you have any doubts regarding their business practices then you should refrain from divulging any personal information or from signing any paperwork that they offer you.
Report fraudulent pension schemes
If you are concerned that a pension company is operating under false pretenses then you should hang up the phone, ignore their sales speech, cease all contact with them and contact either the FCA or Action Fraud.
These official organisations will investigate the activities of these fraudulent businesses and prevent them from scamming further pensioners out of their life savings. Ultimately, by remaining cautious, never divulging your personal information over the phone, via email or on your doorstep to uncertified organisations, and by reporting potentially fraudulent companies to the relevant authorities, you will be able to prevent yourself from falling victim to pension scams and safeguard your finances for the future
Category: Retirement
