FINANCIAL mis-selling specialists at TLW Solicitors are warning that at the first anniversary of the government’s pension freedom reforms (April 6), people in the North East are still being scammed potentially out of *millions of pounds and the figure is rising.
According to financial **reports, one in three people aged 55 and over are still being targeted by pension liberation scams and the number of people being duped out of their savings has doubled since 2014 costing UK investors almost £1.5 billion of which a third relates to pension liberation.
Partner at TLW Solicitors, Peter McKenna, said: “It has been a year since the new ‘pension freedom’ regime was introduced which was meant to give the over 55s greater control over how they use their pension funds through to retirement.
“People are still not getting the right advice on what to do with their pension plans and making irreversible financial mistakes which ultimately impacts on their future standard of living.
“Pension freedom is being seriously undermined without safeguards in place.”
Pensions minister Baroness Ros Altmann has stated that it is not a priority for the Government to legislate the crack down on pension scams at present despite pension freedoms raising £200m more than anticipated for the Treasury, according to a ***report published alongside this year’s (March 16) Budget.
This follows the High Court ruling last month which saw the Pensions Ombudsman decision overturned that sided with insurer Royal London over a suspicious multi-thousand pound transfer to a SSAS (small self-administered scheme) in 2014.
Mr. McKenna warns that this ruling, along with the Budget announcement of the abolishment of the Pensions Advice Service and Pension Wise, could open up more opportunities for scammers if protection isn’t there, making people more susceptible to precarious investment schemes.
He said: “What is needed is a scheme which protects the consumer or at least a greater knowledge of the legal help available should someone fall prey to a clever scam.”
Mr. McKenna added: “While some people are capable of making complex pension decisions others need the help of an advisor who they should be able to trust. People who are not experienced in financial matters are prime targets for mis-selling, ruining their retirement plans by taking some or all of what is in their pension pots.
“In March 2015, the FSCS issued a £20 million interim levy on independent financial advisors due to the rise in mis-sold pension investments involving SIPPs.
“We are urging people of the North East to be extra vigilant as no-one is immune to financial mis-selling.”
The main things to look out for, he advises, include the seller telling the victim there is a ‘legal loophole’ that there will be no tax to pay. If people access their pensions before the age of 55, they would have to pay 55 percent tax on the withdrawal, even if the money has ended up in the hands of fraudsters. Similarly, saying that a deal is available only for a limited time, asking for the entire sum being transferred immediately or being told that returns are guaranteed, should raise alarm bells.
He continued: “Thankfully we have been able to recover losses for clients after bad advice caused people to enter into risky investments, but to never take the risk in the first place and seek regulated third party advice would be best.”
The FCA’s new SIPP regulations are coming into force on September 1, 2016 which aim to make the issues of responsibility between the investor, SIPP provider and those recommending investment clearer, in the cases where investments have been mis-sold.
The changes to SIPP investment rules are the latest in a series of issues relating to the pension industry.