Chancellor George Osborne used his fifth Budget speech to unveil an unprecedented package of pension reforms, stating no one will have to buy an annuity in the future.
On 6 April 2015, the rules that dictated what we did with our pensions were scrapped. Previously, you had to convert your pension into an income stream, which for most meant buying an annuity. Now every saver can access more flexible income drawdown plans or simply take the cash.
The then pensions minister, Steve Webb, said that over-55s were free to blow their pension on a Lamborghini should they so wish. Many in the industry expressed concerns that savers would fritter their savings away on cruises and home improvements, butPaul Keeble, head of media relations at Retirement Advantage, said the initial flurry only involved the removal of smaller pots.
This was echoed by Murray Smith, director at Matioli Woods, who said: “The basis that people would be taking money out to buy Maseratis and world cruises just wasn’t happening.”
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However, a new problem has come to attention of experts. Some 14 per cent of working over-55s believe they have been targeted by a pension scheme scam since April. It is believed that there could be over 1,600 suspicious companies or schemes involved in UK pension scams, and between April and August, such companies stole more than 9m from savers.
These findings come from Portus, which believed the true figure could be much higher as only 12 per cent of people who thought they were being targeted reported it to the authorities.
Furthermore, the report found that 24 per cent of the scams involved offered other products to invest pension savings in without explaining what they were, while 69 per cent said the suspected fraudsters tried to access their funds by offering a “free” pensions review.
Portus Consulting’s commercial director, Steve Watson, said: The pension freedoms are to be welcomed because they give people greater control over how they use their own money. However, more needs to be done to educate people about pension scammers and also capture and deter these criminals. Employers can also play a role here through their employee benefits programmes.
The amount of money savers lost to pension scammers between April and August was just over 9m, which is around twice as much as the same period in 2014. However, these figures could be just the tip of the iceberg because our research showed that many people dont report the fact that they have been targeted.