Fraudsters ready for a pension payday

AREP2G Money

It's just days until retirees can exercise new freedoms and get their hands on their pension cash, but they're not the only ones excited by the prospect of all that money coming into circulation.

Scammers are already sniffing out ways to part you from your pension and experts are worried that fraud poses the biggest threat to the new freedoms.

Pre-freedom the biggest scam the pensions industry had to fight was pension liberation, where those aged under 55 were encouraged to transfer their savings to rogue schemes who left them with huge tax bills, invested their money is rubbish investments for high fees, or in the worst cases ran off with the liberated money.

Operating a pension liberation scheme took hard work, including convincing HMRC to register the scheme, avoiding upsetting the regulator and convincing pension providers to transfer the cash. Pension liberation is a very sophisticated con.

Because of the sophisticated nature of it, for individuals being scammed, pension providers were often the last line of defence stopping them losing their hard earned savings.

Liberation will no doubt exist after pension freedom is introduced because those under age 55 will still want to get their money out. However, fraudsters have basically been handed an open invitation to target over 55s.

Payday for fraudsters

Why go to the bother of dodging the taxman, regulator and pension providers when you can go straight to individuals, encourage them to get their money out and invest it your 'once-in-a-lifetime' opportunity? And it will often be too tempting for retirees to hand that money over, and they'll have no one to stop them.

Retirees won't have the pension providers covering their backs, discouraging them from transferring into dodgy schemes - if someone aged over 55 request their pension cash it has to be handed over, no questions asked.

For financial fraudsters, pension freedom is a huge payday. There will be between 300,000 and 400,000 people turning 55 every year, if just 1% of them are scammed it will be a tragedy.

The truth is that giving people access to their money is a disaster waiting to happen. The regulator is trying to make people aware of the risks with its 'scam smart' campaign but it's going to be too little too late for those already being groomed by investment scams and put their life savings into Brazilian rainforest or Cuban condos.

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Fraudsters ready for a pension payday

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.


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