Aviva is calling on the Government and industry to act now to stop the spiralling number of people being persuaded by fraudsters to access their retirement savings early – at huge financial cost.
This practice is known as pension liberation, whereby companies claim they are able to help pension savers gain early access to their pension pot before reaching the official retirement age of 55.
But accessing your pension early is never cost effective, and can incur huge tax charges as well as fees of up to 10% - 15% of the pension fund's value. This means you could lose up to 70% of saved pension funds!
On top of this, many of the firms promising pension liberation are actually unauthorised to do so, and in some cases are even acting fraudulently, which means you risk losing your entire pension savings if choosing to access funds early.
In light of this Aviva says the Government should act now by imposing stricter rules on pension transfers.
The pensions provider said it is continuing to see a rising number of suspicious pension transfer requests, and is refusing these where necessary.
In fact, it expects to have stopped around 600 cases in the UK with a value of approximately £14 million by the end of this year, saying this suggests that the combined insurance industry may be stopping around £150 million's worth.
Because of this it says the Government needs to stop pension liberation at source, rather than rely on pension providers to pick up suspicious activity.
"Action needs to be taken now to stop pension liberation 'at source' rather than at the point where providers are being inundated with transfer requests from customers who mostly don't understand how much money they stand to lose," said Aviva's head of policy, John Lawson.
"Fraudsters are not going to stop when they see an opportunity, so it's essential that we make it impossible for them to operate."
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