Pension scams are on the rise

Pension scams are on the rise

Fraudsters are bombarding people aged over 55 years old with cold calls and emails offering bogus pension opportunities as they look to take up the new retirement freedoms, according to new evidence from Citizens Advice.

Four months after the pension reforms came into effect, figures from the consumer body showed that two in five members of Citizens Advice staff helping to offer the Government's new Pension Wise guidance service have seen people repeatedly targeted with pension scams. A further one in 10 pension staff saw people who had either responded or fallen prey to a scam.

Pension Wise is a free service offered to help people decide what to do with their money in the light of the new flexibilities, which mean that people are no longer required to buy a retirement income called an annuity with their pension savings when they retire. Citizens Advice offers face-to-face guidance as part of the Pension Wise service.

Half of Citizens Advice pension workers think that pension scams are evolving into investment scams, targeting the cash lump sums people can release from their pension pots. A further third of staff from across the service think that scams targeting the over 55s have increased.

Gillian Guy, chief executive of Citizens Advice, said: "Opportunistic fraudsters are finding new ways to go after people's pension pots including offering free pension reviews and promising to invest in funds that don't necessarily exist.

"Pension and investment scams are particularly dangerous as they can destroy people's entire pension pot, leaving them with little or no savings for retirement. We will be monitoring pension scams closely in order to track how they are evolving, and warn consumers what to look out for."

Pensions Minister Baroness Ros Altmann urged people not to "fall foul of conmen who want to snatch your money".

She said: "If you receive emails, or junk mail with promises of get-rich-quick schemes, chuck them in the bin.

"And if you get cold-called by someone offering a pension review or help to trace a lost pension, hang up because the chances are it's a scam."

Emerging scams seen by Citizens Advice include:

- Unspecified financial products. People are asked by fraudsters to give them access to their pension pots, who would then invest them into financial products on their behalf. Despite offering a high rate of return, scammers were unable to explain what the investments might be.

- Offers of "free pension reviews". People are texted or cold-called with offers of a free pension review. The caller then asks to visit the person in their own home, bringing paperwork that would allow them to get access to their pension details. One man responded to an internet advert for a free pension review, and was visited by someone who claimed to be an independent financial adviser but could not describe any investments.

- Investments for pension cash. People are approached with offers to invest their pension cash into products such as property overseas or fine wines. One investment scam featured two salesmen, one who visited the potential customer to get access to his pension details, and a second to encourage him to invest his pension and any other savings into property in South Africa.

Economic Secretary to the Treasury, Harriett Baldwin, said: "We are working tirelessly to shut down illegal scams and bring scammers to justice.

"We've already made it illegal to imitate Pension Wise, are running scams awareness campaigns and have set up the Financial Conduct Authority which has the power to prosecute scammers.

"If you are in any doubt about how to spot a scammer or want to talk through your retirement options, I urge you to visit the Pension Wise website or book a free telephone or face-to-face guidance session."

The research, which was carried out in June, surveyed 468 Citizens Advice staff across England and Wales, comprising 283 managers, staff and volunteers and 185 Pension Wise staff.

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Pension scams are on the rise

Pension experts at Mercer have identified the countries with the best pension systems. At number 10 is Singapore.

The system is based on the Central Provident Fund, which covers everyone in a job. Some of the cash can be withdrawn during your working life, and a prescribed minimum drawn down at retirement as an income.

Overall, Singapore scored 65.9 out of 100. It fared well on sustainability measures, and integrity, but relatively low incomes in retirement dragged its combined score down.

The UK scored 67.6 out of 100. The system was ruled to have great integrity, and good incomes in retirement. The overall scores were also up from the year earlier, as auto-enrolment was rolled out further, bringing more people into workplace schemes.

The researchers, however, were worried about how sustainable the system would be in the future. They called for an increase in minimum pensions, and added that more people ought to be encouraged into workplace schemes and persuaded to contribute more to their pension. They also wanted to see more people saving privately for their pension, and working later in life.

In Chile the state offers means-tested assistance, a mandatory centralised pension for employees to contribute to, and there are voluntary employer schemes.

Chile score 68.2 out of 100. Its highest score was for integrity, with another good mark for sustainability. Relatively low incomes in retirement let it down, and the researchers said the biggest improvements would come from raising the contribution levels.

Canada has a universal flat-rate pension - with a means-tested supplement. There’s an earnings-related pension based on lifetime earnings, plus voluntary workplace and private schemes.

It scored 69.1 out of 100. Its best score was for incomes in retirement, while it also performed well for integrity. Its only relative weak point was how sustainable it might be for the future - particularly because older people don't tend to stay in work.

Sweden has an earnings-related system with notional accounts - although this system was introduced in 1999 so it’s still in transition from a pay-as-you go system to a funded one. There’s also a means-tested top up.

Sweden was given 73.4 out of 100. It scored excellently for integrity, and well for sustainability. The overall score was brought down by incomes in retirement, and the researchers called for more workplace and private pensions.

Switzerland has an earnings-related public pension, a mandatory occupational system and voluntary private pensions.

It scored 73.9 out of 100. It fared well for integrity and reasonably well for incomes in retirement. The researchers just questioned its sustainability.

Finland has a means-tested basic state pension and a range of statutory earnings-related schemes. It scored 74.3 out of 100.

It had high integrity scores, with a less positive result for incomes in retirement, and a surprisingly low score for sustainability. The researchers called for higher minimum pensions, higher mandatory contributions and encouraging people to work longer to improve sustainability.

The Netherlands has a flat-rate public pension and quasi-mandatory earnings-related occupational schemes - which are industry-wide defined benefit schemes based on lifetime average earnings.

The system scored 79.2 out of 100. All its scores were high - particularly for the integrity of the system.

The system in Australia consists of a government scheme, a mandatory employer contribution into a pension, and additional voluntary contributions from individuals.

It benefits from the fact that all workers have been automatically enrolled in their company pension schemes for some time, so participation rates are high. The minimum contributions have also been raised recently, which means workers are building reasonable retirement incomes. It had an overall score of 79.9 out of 100, with the only question mark being over sustainability.

Denmark’s system includes a basic state pension, means-tested state top-ups, a fully funded defined contribution scheme and mandatory occupational schemes.

The researchers said it was "A first class and robust retirement income system". It scored 82.4 out of 100, with high marks across the board.


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