Attempted frauds and scam retirement schemes are on the increase before the introduction of George Osborne’s pension reforms next month, the City regulator has warned.
Martin Wheatley, chief executive of the Financial Conduct Authority, said that it had shut down a “lookalike” website that had been trying to pass itself off as the government’s PensionWise site, providing free guidance to people worried about what to do with their savings under rule changes that release them from having to buy an annuity.
Mr Wheatley said that the FCA also had cracked down on an unauthorised investment firm that had been convincing people to switch their money into a self-invested personal pension, only to make “entirely inappropriate” recommendations about how the capital should be put to work.
The watchdog chief said that it was “hard to put a number” on how much fraudulent activity had been going on in the run-up to April 6, but he added: “It has been something that has been building for some time, only with an accelerating trend.
“We are very worried about it. We are seeing it at the moment and having to act very quickly.”
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The regulator is also worried that fraudsters will step up their activity in the weeks that follow “pension freedom” day to take advantage of people’s uncertainty and a surge in demand for flexible retirement products.
“In any given year, you will see anything up to half a million people retiring. Over the past 12 months, sales of annuities have fallen away as people have deferred their decision. When there is pent-up demand, there is always a concern,” Mr Wheatley said.
Mr Osborne caused a sensation a year ago when he sprang the most far-reaching reforms to the retirement market in a generation on an unsuspecting insurance industry.
The chancellor declared that in future retiring savers would no longer need to buy an annuity, giving them an annual income for life when they stop work, but could take their pension pot as cash or invest it as they please. His overhaul came into effect immediately for those with pension pots below £30,000 and will apply to all savers from next month.
Mr Wheatley said he believed that the regulator had done all it could do to ensure that consumer protection measures were in place, including forcing pension providers to supply “risk warnings” about their policies and point out the tax implications of various investment decisions.
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As well as highlighting how a policyholder’s health could affect the amount of money their received in retirement, providers must also warn customers about the risk of pension scams.
Although confused savers will be able to use PensionWise, consumers will have to bear some of the responsibility for their decisions, particularly if they choose not to seek the free guidance, Mr Wheatley said.
“The reality is that to be able to argue you have been mis-sold a product, you have to show that it was unsuitable advice that you relied on when buying it,” he said.