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Pension scam losses treble month after freedoms

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Losses resulting from pension scams trebled in May, just a month into the roll out of the pension freedoms.

National data collected by City of London police show reported losses shot up 235 per cent in May to £4.7m from £1.4m in April, according to the FT.

There were 3,704 reports of pension liberation fraud in the two years to May 2015, with combined losses of around £25m.

Average losses from scams are now at around £15,000.

Prior to the reforms savers were typically targeted by firms offering early access to pension via “liberation” schemes.

But fraudsters have changed their tactics now people can take their entire defined contribution pension pot as cash from the age of 55.

The Department for Work and Pensions, part of a multi-agency taskforce tackling scams, says the data “should not be taken out of context or wrongly described as a spike.”

It says: “Rises could be due to a number of factors, such as increased industry reporting or rising awareness.”

A DWP update published today reveals 15 scam websites have been suspended, and the National Crime Agency has snapped up 70 domain names to prevent them from falling into the hands of criminals.

Association of British Insurers figures released in July show savers have withdrawn £1.8bn in the first two months of the pension freedoms.

In April and May, savers took out £1bn in 65,000 cash withdrawals from pension pots. The average pot taken was £15,500.

There have also been 170,000 withdrawals from income drawdown policies, worth £800m.

Savers have bought 11,300 annuity policies, worth £630m. And 10,300 income drawdown plans have been purchased, worth £720m.

This compares to £1.2bn a month in annuity sales at their peak in 2012, when £100m per month was put into income drawdown products.

The average annuity was purchased with £55,750 in April and May, and the average fund put into drawdown was £69,900.

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. The whole idea that, upon reaching the age of 55, people can be trusted to behave responsibly if permitted unfettered access to their pension funds is turning out to have been woefully misjudged ~ much as predicted. It’s been a bonanza for the scammers and it isn’t going to fade away any time soon.

  2. And the biggest scammer of all is …….. George Osborne.

  3. Are they “losses” ? Or in the course of time will there turn out to have been some advice involved (transfer to a SIPP for example) and the FSCS levies will cover the scammed?

    • FSCS does not cover the unregulated scammers. That’s fraud of which they are unlikely ever to see their money again.

      • FSCS doesn’t cover UCIS but regulated advisers have still had to cough up a shed load of FSCS levies. My point is perhaps better made as a question: Did any of these scammers use/involve a regulated adviser to facilitate said scam? if “yes” we will end up paying for it

  4. On the topic of pensions and the “consultation” now being bandied about concerning the proposed complete destruction of pensions. Can someone please explain why we have a Pensions Minister who is obviously not consulted when it comes to policy or proposals? It appears that this Government is not that different from Labour under Blair. Ros Altmann was asked to think the unthinkable by them and then was promptly sacked when she did so. Now it seems that Osborne merely wants her as a dummy in the window.

    This seems to coincide with what appears to be disregard of the Regulator when formulating policy. It seems that Osborne and his Treasury team just want to shovel manure and let the regulator tidy up after them, instead of just consulting first with those responsible for ensuring the smooth running of retail financial services. Hence the departure of Mr Wheatley and no doubt his replacement by a more malleable candidate. Perhaps he can now write a follow up to his namesakes book – The Devil Rides Out, during his gardening leave. Might I suggest “George – The Destruction of Good.”

  5. As ever, the problem is short-termism. The Government is hoping for a tax bonanza now, off the backs of those who cash in their pensions early, and possibly a boost in its popularity as the result of this ‘bread and circuses’ policy. By the time the money runs out and the state is facing the problem of an even more impoverished pensioner class, this Government will no doubt have hung up its size 10s and retreated to a comfy old age (courtesy of a generous Parliamentary pension). By then, the ratio of working people to pensioners will mean that the increased welfare bill will put an appalling tax burden on our children – as if they didn’t have a burden to carry already with record levels of student debt. And pity the poor pensioners, who will be far worse off than they are now. It makes auto-enrolment something of a sick joke.

  6. I do believe people can be trusted with their own money, the trouble is…..many are victims to very good con men or women ! and I don’t think the clients are to blame in most instances !

    This IMHO, its largely to do with the regulator, and the press, (yes they have to shoulder their blame too), in completely ruining the reputation of the advice industry. Now pre RDR it was bad enough, then RDR was supposed to push forward the professionalism & reputation of advice ? but what happened, all that came out of the FCA was negative, most (if not all) of what was reported was miss-selling this miss-selling that, fines, levies, scandal after scandal !!! for heavens sake we even have MP’s shouting about pension rip off costs from IFA’s and providers.
    People might be a bit dense (at times), but they are not deaf or blind ?

    Its little wonder any meaningful client would walk in the door of an IFA or provider, of course they are going to DIY it, or be lured by cost !!
    And now look where we are !

    We want people to get good advice, the FCA want people to get good advice (I think), …….. now you (the FCA) have to show and demonstrate you are behind a very good professional industry because unless you can be positive, this problem will snowball !

    It just goes to show RDR was a £2 billion quid disaster, and woefully impractical !!

  7. Christopher Petrie 27th July 2015 at 3:31 pm

    @ DH. Pensions freedoms, and the scams from it (and before it) have nothing whatsoever to do with RDR.

    As reported in another article, the fall in the number of advisers over the last four years has been far, far lower than the doom-sayers suggested would happen.

    RDR happened, a long time ago now. Time to move on and deal with the live issues of today, not yesteryear.

    • Totaly agree Christopher, the point I was making is/was the RDR was introduced to lift and professionalise the advice industry ? so why do/did the FCA demonise it (advice) at every turn, publicly and in the press ? yes we have problems that do need to be addressed, but is washing them in public solving the issue or making it worse ?

      I do believe this point is very relevant in the problems of today, in that there is less confidence in advice and the advice delivery now than pre 2012 ? this is very much demonstrated by this article !

      Which is why a great many consumers will try to DIY advice, or do it on the cheap as they say (the con men enter the stage), now we know when this comes crashing down it does nothing but stick to our already soiled & smelly blanket ?

      Yes RDR happened many years ago, but it “IS” our present and future !

      Just because you fancy changing to an (very expensive) egg sandwich for lunch today, doesn’t mean you have to endure it for eternity,

      “Blind acceptance is a sign of stupid fools who stand in line”

  8. Julian Stevens 28th July 2015 at 9:36 am

    I may be wrong, but I thought the prime driver of the enormous increases in FSCS levies with which we’ve been hit in recent times is that it has now taken on responsibility for investor losses arising from failed UCI Schemes. Or is it just unregulated investments made via SIPPs?

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