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New pension freedoms could increase risk of fraud


The new pension freedoms and flexibilities announced in the 2014 Budget may mean that pensioners are more exposed to losing their life savings to scammers.

Pension scammers are evolving their tactics to try and get as much money as possible out of those aged 55 and over, which may be easier for them after the new regulations come into place.

Standard Life, a long term savings and investments company, believe pensioners will be far more likely to lose their life savings to scammers, as the ability of pension providers to prevent transfers of funds into fraudulent investments will lessen once the new freedoms come into force.
At the moment, pension providers can block the transfer of a member pension fund into a fraudulent scheme by taking out “fit and proper” checks. Standard Life has blocked around 400 suspicious transfers, totalling almost £14 million, and has blocked 18 such transfers in the last month. With the new pension freedoms in place, victims could be lured into transferring their fund into a fraudulent scheme and their pension provider is not required to perform checks.

Jamie Jenkins, Head of Pensions Strategy at Standard Life, said:

“While providers will still be able to stop transfers from one pension to another, the new retirement freedoms will mean people may simply release their cash and then pass it on themselves to people running scams.

“Criminals have adjusted their tactics to the new pension freedoms and no longer need to fool both the individual and their provider into transferring funds. We can expect those who take their pot as cash to be approached directly – via cold calling, emails, and other means – to entice them into legitimate-sounding investments. Those who choose to take some or all of their pension fund as cash should be vigilant about such approaches, and mindful that they bear the entire risk of investing in dodgy schemes without the protective umbrella of their provider.”

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