AT ITS best, planning for retirement can be a complicated, time-consuming and confusing business.
At its worst, it can be the nightmare from hell, presenting a head-bursting, life-changing minefield of bureaucracy and a seemingly endless array of financial options.
The whole business took a huge change for the worse in 2015 when the Government’s pension reforms gave the over-55s an even bigger range of choices as to how they can use their retirement savings.
That’s not to say that the new freedoms introduced at the time were not welcome – and widely praised – but they made life for those approaching retirement quite a lot harder, especially for people who found just balancing the weekly household budget a challenge.
By far the biggest problem was that they opened a mass of opportunities for scammers and fraudsters to exploit.
West Yorkshire Trading Standards was among the organisations that spotted the potential for trouble and issued warnings at the time.
As David Lodge, head of West Yorkshire Trading Standards Service, put it: “There is a scam out there for everyone, but we know that our older, more vulnerable residents often fall victim to scams all too easily.
“As we continue to raise awareness across West Yorkshire of the tactics commonly being used by criminals to trick people out of their cash, we hope to build resilience in communities and prevent residents from becoming prey to fraudsters.”
His comments were, to coin a phrase, right on the money.
Up to the end of May this year, Action Fraud, the UK’s national fraud and cyber-crime reporting centre, had recorded more than 2,900 cases of pension scams, with more than £43 million of retirement savings lost.
Action Fraud says: “Pension scammers promise to convert pension funds into cash before retirement, or in some cases they may suggest people can take more than 25 per cent of their pension pot as cash.
“Criminals are believed to be fraudulently exploiting the pension liberation process in a number of ways. These include: failing to advise members of the tax implications of receiving cash from their pension; failing to advise members of the full extent of fees to be paid in relation to any onward investment; and falsely representing anticipated levels of returns when investments are either non-existent or incapable of providing such a return.”
They say the scammers have a variety of tricks designed to catch out the unwary or confused.
They may claim that you can access your pension pot before age 55; approach you out of the blue over the phone, via text message or in person door-to-door to entice you with upfront cash; offer a free “pension review” or try to lure you in with so-called “one-off” investment opportunities.
Earlier this year, the Serious Fraud Office launched an investigation into storage unit investment schemes, touted as a growth industry and potentially highly profitable, amid fears that large numbers of people had lost big sums of money after investing their pension pots in them.
One man was apparently persuaded to transfer almost £370,000 out of his NHS workplace pension into a storage unit scheme with an alleged eight to 12 per cent return and was likely to lose all his money as a result.
It’s hardly surprising that people fall for such scams when all most of us want to do is ensure as comfortable a retirement as possible.
Last year, Citizens Advice estimated almost 11 million consumers had received unsolicited contact about their pension in the previous 12 months.
It prompted them to carry out a survey of 2,000 people which found that three out of four people were confident they could spot a pension scam.
But when they tested them with three similar pension advertisements, only one of which was legitimate, 88 per cent of those who took part chose the two ads containing scams. Most of those fooled said they had opted for the ones offering the biggest potential returns.
The Pensions Regulator suggests five steps to avoid becoming a victim of a pension scam:
• If you are cold-called about your pension, just hang up
• Check the credentials of the company and any advisers – who should be registered with the Financial Conduct Authority
• Ask for a statement showing how your pension will be paid at retirement, and question who will look after your money until then
• Speak to an adviser that is not associated with the deal you’ve been offered, for unbiased advice
• Never be rushed into agreeing to a pension transfer
But is that enough to safeguard your precious retirement savings?
The Government’s Work and Pensions Committee this week launched an inquiry into the reforms to find out whether they are achieving their objectives and whether enough is being done to prevent scams and mis-selling.
Although for many people the choice of what to do with their pension savings in preparation for retirement is the biggest financial decision they will make, the committee says research by the Financial Conduct Authority suggests people are making their pension choices without the support available, increasing the risk they will not get the best value from their savings.
Of people aged 55 and over planning to retire in the next two years, just seven per cent had used the free and impartial Pension Wise guidance service.
Committee chairman Frank Field said: “Pension freedom and choice liberated savers to choose what they wanted to do with their own money. This was welcome, but as with any radical reform it is important to monitor its practical effects closely to ensure it is working as envisaged.
“In this case it is vital that adequate support ensures people are equipped to ensure they don’t make decisions they subsequently regret.
“I am particularly concerned that savers are more vulnerable than ever to unscrupulous scam artists. This policy must not become the freedom to liberate people of their savings.”
The committee has asked for written evidence submissions by October 23 but it’s not known how long it will be before it makes its recommendations.
In the meanwhile, there can be just one simple message for those seeking to invest their retirement savings: be very, very careful.
HOW TO GET HELP
For advice on pensions and scams:
pensionwise.gov.uk or phone 0800 138 3944
pensionsadvisoryservice.org.uk or phone 0300 123 1047
citizensadvice.org.uk or phone 03454 04 05 06
To report scams:
actionfraud.police.uk or phone 0300 123 2040