Half of pensioners lured by scams and risky schemes

Around £11 million of retirement pots are at risk from worrying transfers, according to XPS Pensions.

Half of pensioners transferring out of final salary pensions have been enticed to invest in scams and much riskier schemes, research shows.

So-called ‘red flags’ – evidence the new scheme the pensioner moved to was high risk or a scam – were found in more than half of the 99 pension transfers reviewed by consultancy XPS Pensions last month.

XPS told the Times the 50 concerning transfers accounted for almost £11 million of pensioners’ retirement funds. 

So far in August XPS has ‘red-flagged' 18 out of 31 defined benefit transfers it has vetted.

Since 2015 those aged over 55 have been able to take their pensions more flexibly under pension freedoms rules. It has led to a surge of transfers out of final salary schemes, which pay a fixed amount each month and as such are guaranteed but more rigid.

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Fraudsters have done their best to cash in on savers’ appetite to move their money, by encouraging pension holders to move into unsuitable high-risk schemes or outright scams.

Uncertainty about how to navigate retirement planning is widespread, leaving savers vulnerable to fraudsters. Only just over half (55%) of those aged 55-64 said they knew enough to make pension decisions, in a survey this month by retirement specialists Just Group. 

Those aged 45-54 were even less confident, with under half (49%) saying they know enough to make decisions about retirement.

Stephen Lowe, group communications director at Just Group, said: “People recognise they lack understanding of the complex decisions faced when making financial plans for retirement.

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“The Financial Conduct Authority and the Money and Pension Service have developed a range of ‘nudges’ to boost take up of the government-back, free and impartial Pension Wise service among non-advised pension savers.  

“The results of the trials were positive but a far more ambitious approach will be needed to deliver the transformation that is required to ensure the majority, and not a minority, benefit from impartial guidance.”

The Work and Pension Select Committee said in July it will launch an inquiry into how pension freedoms have worked, and how people can be better protected from scams.

One in 10 UK adults have either been a victim or know someone who has fallen victim to a scam since the outbreak of Covid-19, according to research by Canada Life, with victims losing around £566 on average per scam.

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