The coronavirus pandemic has bred an outbreak of pension scams as scammers take advantage of people’s financial worries during lockdown by preying on pension holders.
There has been a demand for the government to give pension regulators more authority to stop pension scams, according to Express. In light of some major research that has shown a flurry of scam “red flags” during the pandemic, more regulation may be necessary.
XPS Pensions recently discovered 51% of pension transfers covered by XPS Pensions scam protection have been labeled with red flags since the initiation of the pandemic, Express reported.
According to XPS Pensions, the amount could equal around £25 million in pension savings. Since 2017, Britons have faced millions in losses due to pension scams.
The company has warned savers about pension scams, reporting it has seen an extreme escalation in the number of red flags. From 2015 to 2018, there were major red flags in 1 in 8 cases; in July and August 2020, half of all cases were red-flagged.
The factors generating the red flags have also changed.
According to Professional Adviser, cold calls decreased from 22 % to 2% between 2016 and 2020, but cases of expensive and confusing fee arrangements increased by 45%.
“The worrying spike in recent months is driven by a significant increase in members that have little to no understanding of fees in the arrangement they want to use to access their pension savings,” an XPS spokesperson said about the findings, as reported by Express. “This may be a result of people urgently wanting to get at their savings due to current economic conditions.”
“Over the last year we have seen more schemes provide access to independent and robust financial advice covering an additional 18,000 members,” the spokesperson continued. “We welcome this, but more could be done if there were clear guidelines and regulatory protections for employers and trustees who seek to put in place education and access to such advice.”
Pension scam research has been a part of the Work and Pensions Committee.
The committee has been asking for evidence on the effect of pensions freedoms. This call for evidence required collecting data on the trend of pension scams before and after the coronavirus pandemic, according to Professional Adviser.
XPS Pensions stated that needless charges can have a major effect on a person’s pension income and can cause a saver to run out of their pension eight years too early versus a less expensive option.
XPS Pensions provides fraud protection services to employees in fields such as manufacturing, IT, energy and more, according to This Is Money.
Fraud protection is meant to halt pension scams by tracking and scrutinising scam activity. The fraud protection system diagnoses and tracks up to 40 pension scam red flags when savers process transfers.
The general lack of understanding around how pension transfers work is also contributing to pension scams.
During the coronavirus pandemic, pension holders were fearful, might have faced some financial pressures or may have lost their jobs. During times of confusion and scarcity, pension scam activity can increase as frauds try to take advantage of the situation, This Is Money reported.
Many pension holders may have been targets of pension scams that persuaded them to transfer their money into dicey investments.
Being approached randomly about your pension is a red flag.
Always be wary of people cold-calling about your pension, offering a free review or pressuring you to invest pension money swiftly.
You should never make decisions about your pension in a rush.
Always make sure that you are speaking to a legitimate firm when discussing the details of your pension.
If you are concerned about any offers to transfer your pension, you can contact the Pensions Advisory Service to make sure the offer is legitimate. Parliament is committed to helping stop pension scams.
Should the government step in with more regulations to prevent pension scams? Share your thoughts in the comments section.
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