Reforms due to be introduced in April next year will allow people to cash-in annuities if they wish. While there will be an advice requirement in place for pots above a certain size and risk warnings handed out by providers, there remains a significant danger these people will be targeted by fraudsters.
In the six months following the introduction of the pension freedoms in April last year, the amount of money reported stolen through pension scams almost doubled, from £5.4m in the same period in 2014 to £10.6m in 2015 (see graph below), according to figures published by the City of London Police.
Source: City of London Police
This is likely to be only a small proportion of the actual incidence of fraud nationwide, however, as it only covers cases reported to the City of London Police.
HMRC estimates some 300,000 people will cash in their annuities in the first year of the reforms, potentially releasing billions of pounds in pension cash and making them an obvious target for scammers.
AJ Bell senior analyst Tom Selby says: “The Government needs to stop dithering and take meaningful action on pension scams before the secondary annuity reforms are introduced. This is a train crash waiting to happen - policymakers must not sit idly by and watch it unfold.
“Pension scammers ruin peoples’ lives, and it is incumbent on everyone connected to the pensions industry – including politicians, regulators and providers – to do all in our power to defeat them.
“Banning cold calling for pensions would not solve the problem of pension fraud altogether, but it would provide a real deterrent to scammers by cutting off one of their primary methods of contacting retirees.”
A petition launched by financial adviser Darren Cooke calling for pensions cold calling to be banned has already attracted over 1,000 signatures. You can sign the petition here.
The campaign has also received the backing of former pensions minister Baroness Ros Altmann.