Nearly 1 in 10 Individuals Fear They May Have Been Targeted by Scammers

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Posted on: 17th May 2018

Nearly 1 in 10 Individuals Fear They May Have Been Targeted by Scammers Since the Introduction of Pension Freedoms

Nearly 1 in 10 individuals over the age of 55 are concerned that they may have been the target of suspected scammers since the introduction of pension freedoms, according to research conducted by Prudential. The survey, which polled a representative cross section of 1,000 people, found that 9 per cent of individuals who were contacted regarding their pension funds fear that they may have been targeted by scammers. Worryingly this sort of behaviour is becoming increasingly common according to Prudential. It claims it is now a common practice for scammers to offer to unlock or transfer funds in the attempt to defraud people of their retirement savings.

Pension Freedoms: The Cause of Concern

According to Prudential, 1 in 3 people over the age of 55 said the risk of losing their savings due to fraud had become a major concern since the introduction of pension freedoms in 2015. After the reforms were introduced the number of people transferring out of defined benefit (DB) pension has increased dramatically, as savers sought to take advantage of sky-high transfer values and transfer their nest eggs into defined contribution (DC) schemes.

According to figures by the Office for National Statistics (ONS), the number of funds transferred out of pension schemes almost tripled to a record of over £34 billion in 2017. The research also showed that nearly half of those approached by potential scammers said they did not report their concerns as they were either unsure how to or were unaware of who they could report the fraudsters to.

Reports on the Rise Since Pension Freedoms

According to recent pension fraud data from Action Fraud, the national fraud and cybercrime reporting service, 991 new fraud cases have been reported since the launch of pension freedoms. These reports involved losses totalling nearly £23 million.

Prudential found that less than 1 in 5 (18 per cent) of people who suspected they had been approached by scammers had bothered to report their concerns to the authorities. Nearly half (47 per cent) of those said they were offered the chance to unlock their pension funds or access the money early, and 44 per cent said the scams involved transferring pensions.

Around 28 per cent of people who were approached by suspected scammers said they were offered alternative investments like wine. 20 per cent said that they were offered overseas investments; while 13 per cent said that the scammers had suggested investing in crypto-currencies. Around 6 per cent of the survey’s respondents believed they have fallen victim to fraud.

Protecting Pension Freedoms

According to Vince Smith-Hughes, retirement income expert at Prudential, whilst pension freedoms are proving popular with the majority of consumers, they have also created a potentially [lucrative and] profitable opportunity for scammers. He said that people had to be careful and more vigilant if they wanted to safeguard their hard-earned retirement savings:

“If it sounds too good to be true then it usually is, and people should be sceptical of investments that are offering unusually high rates of return, or which invest in unorthodox products which may be difficult to understand. If in any doubt, seeking independent advice from regulated professional advisers will help ensure they won’t get caught out,” he said.

“The Pensions Advisory Service, Financial Conduct Authority and The Pensions Regulator are doing good work raising awareness of the risks of scamming, and by reporting suspected scams, consumers can help the authorities tackle the issue and maintain confidence in pension freedoms.”

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