There are increasing calls for the work and pensions select committee to launch an inquiry into pension scams. The introduction of Pension Freedom in 2015 has seen a huge increase in consumers falling victims of pension transfer scams, with many losing their entire pension funds. Whether it’s getting bad pension advice or being conned by unregulated pension sharks, the news has been full of heart breaking stories of pension scam victims.
Most of the scams exploit consumers who took a cash lump sum from their pensions early, with little or no redress from the IFA or the Financial Ombudsman Service. The Coronavirus has reportedly led to a 33% increase in fraud, with calls for the FCA to focus on fraud and not IFAs.
The House of Lords is also looking to amend the Pension Schemes Bill which will make it compulsory to obtain regulated advice before consumers are allowed to proceed with a pension transfer below £30,000.
Norton Motorcycles Pension Scam Update
Following on from our story on Norton Motorcycles Pension Scam, the Pensions Ombudsman has just announced its Norton Motorcycles Determination, which has ordered Norton Motorcycles former CEO Stuart Garner to repay the money invested in the schemes. This totals at least £11m. The Pensions Ombudsman said Mr Garner “acted dishonestly and in breach of his duty” as a pension scheme trustee.
British Steelworkers Pension Scheme Scam Update
There is good news for the British Steelworkers who fell victim of the much publicised pension transfers scam. The FCA has just written to 8,000 steelworkers saying many people that transferred out of the BSPS since 2017 received unsuitable financial advice and could therefore be entitled to compensation. The FCA has done a sample assessment on advice received and found that 79% had received unsuitable or unclear advise. This comes after a campaign led by Clarke Willmott Solicitors who has recovered £2.4m in compensation for steelworkers so far.
Unregulated Avacade Ltd and Alexandra Associates (UK) Ltd Pension Scam
The High Court has just ruled in favour of FCA’s court case against Avacade Ltd and Alexandra Associates (UK) Ltd. The court case found the companies provided pension transfers to consumers without FCA authorisation and made misleading statements to get consumers to transfer their funds into alternative investments such as office space available for rent, tree plantations and Brazilian property developments. Over £91m was transferred through the schemes.
How to Avoid a Pension Scam
Pension scams are becoming more sophisticated with many scammers appearing to be legitimate companies. Here are a few points that can protect you from being scammed:
- Check the company is regulated and registered with the FCA. Check that their company is listed on the FCA Financial Services Register.
- Too good to be true investment opportunities are more than likely to be a scam. If someone offers you high performing investment deals abroad, your funds will have very little protection if the deal goes wrong.
- If you are worried your employer is going out of business make sure their pension scheme is registered in the UK and covered by UK regulations. If your employer operates a defined benefit pension, the scheme will only be protected by Pension Protection Fund if it is registered in the UK.
- Do not rush into a decision. A genuine pension transfer adviser will not pressure or rush you into making a decision. If you are being pressured or rushed into making a “Limited Time Offer” it will more than likely be a scam.
- Cashing in a pension before 55; if you are offered to release cash from your pension before you reach the age of 55 it is a scam. You can only cash in a pension at 55.
- Do your research. The government has lots of advise on what you can and can’t do with your pension. Check the governments Pensions Advisory Service (TPAS) and Pension Wise website if you are at all unsure about the advise you are being given.