If you're approaching retirement, the last thing you want to worry about is being scammed out of your hard-earned savings. Well, if you're not careful, you could be – so-called pension liberation scams are becoming a growing concern for the industry, and it's vital you understand the new pension rules so you don't lose out.
Figures from Fidelity Worldwide Investment reveal that 13% of people aged 50+ have been approached by fraudsters claiming to offer advice regarding their pension savings. The most common tactic used by these liberation firms was to promise that they could release more than the 25% lump sum as a tax-free payment, or that they could provide early access to pension savings – both of which are not possible under current legislation.
While the majority (61%) of those approached by pension liberation firms instantly detected the advice as a scam, a worrying 27% didn't. A further 12% trusted the advice and were interested in furthering the conversation – a shocking figure, particularly given how vital your pension savings are.
Unfortunately, the issue is heightened by the confusion surrounding the recently-announced pension changes. Fidelity found that 68% of those surveyed didn't know the rules around accessing their pension savings early, while 59% didn't understand that the required age to access their pension as a lump sum was 55+, despite claiming to know the rules.
Alan Higham, retirement director at Fidelity, commented: "While fraudsters have always sniffed around pension savings, the changes set to come into effect next April have created some confusion among consumers. Fraudulent organisations have capitalised on this, encouraging consumers to hand over their savings without fully understanding the tax penalties incurred."
This is backed up by additional research from TD Direct Investing. According to their figures, 51% of those surveyed were confused by the new rules, showing a clear lack of understanding as to what the changes mean, while additional figures highlight the uncertainty over how best to take advantage of the new rules: 69% said they'd need more professional help to decide how to make the most of their pension money while just 29% thought that the changes would benefit them financially, and only 30% were aware of the free advice service available.
John Tracy, of TD Direct, said: "While the new pension rules announced by the Chancellor are a great step towards empowering British people to make their own investment decisions, today's results show that more needs to be done to educate consumers on how to get the best results from their savings.
"The industry needs a greater focus on financial education to help British people get the most out of their money. The marketplace can be complex and confusing, and the recent industry changes in the UK have created a need for a clearer, simpler investing environment."
So, just what can you do if you're worried about being scammed? The key thing is to arm yourself with as much knowledge as possible. Make sure you fully understand what the changes mean – we've compiled a quick overview below, but this shouldn't be seen as an alternative to professional advice. Always contact the professionals so you understand your options thoroughly, and if you are called by a liberation scammer, follow the steps proposed by Fidelity's Alan Higham:
"I would urge any consumers to take a few simple steps if they are unsure of a caller. First of all, a person should never give out details to cold callers and should not be afraid to hang up. Furthermore, someone should especially distrust anyone calling that discusses an entitlement to a 'free Government review'.
"If someone is in any doubt about anything they've been told, they should call The Pensions Advisory Service in order to sense-check any plans before signing anything. Lastly, never deal with firms who exert pressure for a quick decision - there are no 'good deals about to stop'."
Under plans announced in this year's Budget, the rules regarding your pension pot have changed and the tax implications relaxed. Here's a quick overview of what they mean.
Check out our retirement guides to find out more
Use our no-obligation annuity planning service to consider your options
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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