Risk to people who aren’t up to speed with new pension rules

A dramatic overhaul of current rules will hand the public greater control of their retirement savings, but there are growing concerns that the changes will open the door to
conmen.

It is thought the greatest danger will arise from confusion about how the new rules work.

Some savers may be persuaded to hand over their savings, without appreciating the tax penalties they could incur.

Tom McPhail, head of pensions research at Hargreaves Lansdown, Britain’s biggest fund provider, said that ministers needed to do more to put safeguards in place.

“There is a big risk [of fraud] and I don’t think the politicians are taking it seriously,” he told the Financial Times.

“This is not to say that the freedoms are a bad idea, just that not enough is being done to circle the wagons and keep the bad guys out.”

The Financial Ombudsman recently reported an increase in complaints about self-invested personal pensions and unregulated investment schemes.

Meanwhile, the Pension Regulator estimates that £495m was lost to pension fraud in the first half of last year, although the actual figure is likely to be considerably higher.

“The people behind pensions scams are often agile, sophisticated and organised,” said a spokesman for the watchdog. “Whatever the law is, they will seek to exploit it, so we expect the scams we see to continue to evolve.”

Twenty years ago most of the pension legislation would fit into a lever-arch file.  Nowadays the laws would reach from the floor to the ceiling.

At Royds, our pensions specialist Roger May can advise on the legal issues relating to this sector. For more details please visit our website or email Roger.