From April 6, the over 55s can withdraw pensions savings and do as they please with the money. But pensions experts are keen to point out the new flexibility brings opportunities too: for fraudsters. The Government acknowledges the risks. It emphasises the importance of taking professional advice. But some think the Government needs to go further.
Could more be done to protect savers? For example, it’s currently not illegal for someone to pose as a regulated adviser. Regulated in this instance would be an individual posing as someone regulated by the Financial Conduct Authority. In this sense it’s believed more regulation would balance the new freedom to move pension savings around.
Previous fraudulent activity in pensions has centred on helping people “liberate” their pensions before age 55. Currently fraudsters are already cold calling people ahead of the new regulations. It’s not difficult then to see how some individuals might be at risk. Some are calling for the pensions’ industry, regulators and government to work together to find a solution.
The Government is keen to promote its own service Pension Wise as the first port of call for people considering their options. It’s currently an offence for an individual to pose as a Pension Wise advisor.
Pension Wise is free and impartial. Tools on the site are available to help people consider their options. In terms of the new provisions there are currently 4 alternatives. It’s possible to leave a pension pot untouched. At the opposite end of the spectrum it’s possible to take all the money out but only 25% will be tax free. Alternatively it’s possible to buy an annuity and you can take out 25% in cash tax free before buying the annuity. For those wanting regular income it’s possible to take out 25% of the whole pot then subsequent drawdowns of 25% of the remaining pot. They will all be tax free as long as you stick within the 25% limit.
With so much flexibility and potential additional money available it’s easy to why people should be on the alert for fraudsters. The message from industry and the Government is simple. Don’t entertain cold callers and only use regulated advice.