Pensions scams and fraud
You will be aware of the increased choice brought about by the liberalisation of private pensions, that was introduced seven years ago, but in this time, we have seen an increase in the number of tax bills arising from scams.
People over 55 now have greater access to their pension pots and more discretion on how they are invested and drawn down. At our sister charity Tax Help for Older People we see that the tax implications of pensions are poorly understood. Personal discretion over pension liberalisation has sadly coincided with a massive rise in digital crime. People tend to be more trusting of digital pension communications than face to face approaches. The Financial Conduct Authority has revealed that savers were nine times more likely to accept a pension review online than from a stranger in person. Only 28% realised that a free pension review could be the sign of a scam.
Many of the people we help found that if it sounded too good to be true it really was. In addition to providing false information, fraudsters will typically phone, text or email your clients claiming they have loopholes that can yield a higher level of tax-free cash than the usual 25%. They offer unfeasible returns of over 8% from overseas or new and creative investments. They offer loans, advances, or cashbacks on pensions. Scams ignore the good advice and processes of pension professionals. They suggest a single investment or courier paperwork, requiring immediate signature. Pressure is applied to demand quick decision-making to not ‘lose out’ on golden opportunities. The scammers will only have a mobile number or PO box, rather than a verifiable address.
Tax Help for Older People, have helped devastated pensioners who have lost the rewards of decades of hard work. Their dreams of finally enjoying their savings funding a comfortable old age are shattered. There is redress for any individual who receives poor advice from a financial adviser authorised by the FCA through the Financial Services Compensation Scheme. We help vulnerable people when they face a large tax bill that has arisen because of the scam when they have no support and cannot afford an agent to help them understand what has happened and we try to limit the damage. Pension scams are particularly pernicious as long-term investments mean that it is often many years before the tax implications of a scam become apparent. HMRC will contact the victim who is often completely unaware that they owe tax and penalties. They turn to us in confusion and despair.
Tax Help for Older People supports the victims of scams. We also work with other charities, the pensions industry, and the tax professions to spread the word on avoiding scams. We want you to be involved so please follow us on Twitter on @taxhelp4. If you feel that you or your firm can donate to support our work fighting scams, we’d be delighted to hear from you. View our CAF donation page to make a one-off or regular donation to the charities by visiting this website: cafdonate.cafonline.org/18211 Together we can help the fightback against pension crime. It is too serious to ignore, and we hope we can count on you to support our work.