Reports show increasing numbers of over 55s targeted by pension 'scammers'

Product provider Retirement Advantage shared the results of a survey this week in which one third of respondents aged 55 or over reported having been contacted by a potential scammer in the past three months - up from one in five of those aged over 50 during the firm's last survey in June 2015. Respondents said that they had been offered "free pensions advice or investment opportunities" in these communications.

The figures were published in the same week that it emerged Police Scotland was investigating a £10 million pension liberation scam affecting as many as 300 people. Detective Inspector Graeme Everest of the central police force told Pensions Expert (registration required) that many of the victims in this case had "recently been made redundant" or were otherwise financially vulnerable, and had been offered referral payments to encourage them to take part in the scheme.

Pension litigation expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law.com, said that although the reports suggested that the new rules around access to pensions had "opened up the over-55s to greater risk of fraud", there also appeared to be "greater awareness of pension scams" as a result of recent campaigns from the regulators.

"It is encouraging at least that those surveyed appear to be recognising these approaches as being potential scams," he said.

"Inevitably that will not be the case all the time, and there will be plenty of pension funds falling prey to fraudsters exploiting gaps in knowledge and luring those in the over-55s market into superficially attractive investment opportunities. More sophisticated fraudsters will cover their tracks though, so it could be some time before victims find out they have been scammed and we start to get a proper idea of sums lost – which is borne out by the separate news from Scotland," he said.

Changes to the law in April 2015 gave members of defined contribution (DC) schemes more freedom to access their pension savings from the age of 55 without incurring heavy tax penalties or necessarily having to purchase an annuity. At the time, financial watchdogs warned that this could lead to an increase in scammers contacting people approaching 55 in order to exploit their interest in the change in the law.

Scammers had traditionally marketed so-called pension 'liberation' arrangements to younger savers, which claimed to allow them access to their pension savings before reaching the age of 55 by transferring their savings into unregulated, exotic investments. Pension scheme rules prevent individuals from claiming pension benefits until they reach this age, unless doing so on ill-health grounds; and tax charges for 'unauthorised' payments from a pension pot can be as much as 55% of the value of the payment.

As Police Scotland had only made "limited" details of the nature of the fraud that they were investigating available, it was not clear whether the victims in that case were over or under the age of 55 and what sort of scheme they may have become involved in, Fairhead said.

"The comments from the police do highlight, though, the very real risk of fraud being concealed for some time – potentially, a number of years - until individuals who have trusted that they pension funds have been placed into legitimate schemes eventually look to draw their pensions and find there is very little or nothing there," he said.

Financial regulators have set up the 'scorpion' campaign to provide information and resources to help individuals, business advisers and trustees protect themselves and their members from pension scams.