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Pension scam warning after minister gets a dodgy text: Workers approaching retirement warned 'to be on guard'

February 12, 2015 3:15 PM
By Louise Eccles in Daily Mail
Originally published by East Midlands Liberal Democrats
  • Pensions Minister Steve Webb was targeted by a text-based fraud gang

  • He warned people approaching retirement to be careful with their nest egg

  • From April pensioners will not be forced to buy an annuity

  • However, this freedom could allow fraudsters to steal savers' cash

Thousands of the over-55s were warned about fraudsters abusing new pension freedoms by Pensions Minister Steve Webb - after he was targeted in a text scam.

From April, older workers will be able to cash in their pension for the first time and spend as they choose, rather than being forced to buy an annuity.

But in an assault on Britain's nest eggs, criminals are contacting workers and encouraging them to invest their pension pot in everything from dodgy wealth funds to overseas properties which do not exist.

Others are trying to get their hands on people's life savings by offering them free 'advice' on the new reforms and asking them to hand over personal financial information.

Now, Mr Webb has told people approaching retirement to be 'on their guard' after being contacted himself by a firm offering to 'review' his pension savings.

Speaking at a conference hosted by the Resolution Foundation think tank, he said he had received a text message just minutes earlier from a suspicious-sounding company.

He told the audience 'I was sitting upstairs and my phone went. I got a text. I thought it would be my daughter asking for money, but, actually, it says: 'If you have a frozen pension prior to 55 you are now entitled to a free review. Please call back.

He joked: 'Should I call?', before issuing a stark warning, saying: 'People are going to have access to an awful lot of cash and wherever there is cash there are crooks.

'It's a big issue.

'Of course we will do what we can to drive out the crooks.

'But you will never be always ahead of the game and we need everyone top realise there are lots of people out there who want to take your money and do not very good things with it.'

Pension firms have warned that conmen are targeting people in their early to mid-50s who have heard they can soon withdraw their entire pension to spend it or invest it as they choose.

Minister Webb warned people to be careful about where they invest their pension nest egg, file photograph

But Mr Webb said the Government was aware that criminals were capitalising on the new pension freedoms and were doing 'a huge amount of work' behind the scenes to track them down.

He said: 'There is more going on than I can say because we don't want the bad guys to know what we are up to. But buyer awareness is really very important.'

Under radical reforms announced in the Budget, people will soon be able to use their pension like a 'bank account' rather than being forced to invest it in a guaranteed monthly income for life. It follows complaints that annuities had become poor value for money.

In two months' time, over-55s can either withdraw the full amount or take it in chunks. The first 25 per cent of each withdrawal will be tax-free and the rest will be taxed as income.

Experts have warned the popular reforms will be a 'massive turbo-boost to fraudsters' who are trying to persuade people to invest in high-risk or non-existent exotic investment schemes.

The Government has offered everyone access to free, independent guidance before accessing their money. But conmen are using talk of 'pension freedoms' to trick those confused by the changes and offering their own guidance or 'pension reviews' to attract victims, including setting up stands in shopping centres.

A recent study found two in five people have already received messages via email or text inviting them to review their pension or release some of it as cash, according to a new study of UK adults.

Worryingly, more than a quarter said they were tempted to take up the offer, and one in seven said they had contacted the schemes.

Nearly a quarter of those surveyed also said they were unsure sure what to do with their pension when they reach 55.

Steve Hyndman, of pension firm Phoenix Group, which commissioned the survey, said: 'People can lose their life savings through these scams.

'And unfortunately, they are likely to be very successful.

'From April, thousands of people will have access to their funds. For many, it might be the first time they have had access to a lump sum and they will be looking for places to invest it. They will be vulnerable to these kinds of cons.

'If some invests in a scam at 55 but does not retire until they are 70, they may also not even notice their money has gone missing until they try to access it years later when they need it.'

He said other scams tried to convince under 55s that they too should withdraw their pension pot.

However, this incurs a huge 55 per cent tax charge and the conmen then take up to 30 per cent of the remainder, leaving the victim penniless.

The Association of British Insurers spokesman claims the threat to consumers is 'evolving', saying: 'Our members have noticed schemes offering unrealistic returns in dubious and risky unregulated investments; and adverts falsely claiming links with pension flexibility and guidance about retirement options being introduced in April 2015.'