Less than two fifths of over-50s are wary about potential scams targeting newly freed pensions.
As pre-retirement over-50s start to think about how they will take advantage of the new pension freedoms, they may be leaving themselves vulnerable to pension scams due to their apathetic attitude towards a potential attack.
This is in spite of the fact that fraud levels are increasing and scammers’ methods are becoming more sophisticated. Recent figures from the City of London Police show that between April and August 2015, more than £9m of pension scams were reported in the city – compared to £4.5m for the whole of 20141.
The new rules present opportunities for fraudsters to access very large sums of money. In some cases, fraudsters are stealing the identities of pensioners in a bid to access their pension pots, and our previous research has shown that pensioners have been a particular focus for identity fraudsters.
More than two fifths (42%) of pre-retirement over-50s would choose to reinvest their cash lump sums in more profitable projects. But less than one in four (23%) would consult a financial adviser. The majority would also choose to take control of the decision themselves with more than half (51%) stating that they would do their own research when deciding where to invest.
Our research also found that one in five (20%) would treat themselves to a dream holiday or a new car. Spending the pension on a dream holiday was significantly more likely among men, with nearly one in four (24%) saying it would be their first choice. This was compared to around one in seven (14%) women. Overall, it was the third most popular option for those who would take their pension in a cash lump sum.
But with scammers targeting pensioners, cyber-crime on the increase and many of these individuals showing a lack of concern about the issue, they could be leaving themselves open to fraud.
Opinions are split as to who should take responsibility should pension fraud occur. Almost a third (29%) believe it is the individual’s own responsibility if they are defrauded of their pension pot. But a fifth (20%) believe pension providers should be held responsible, while one in six (17%) believe the Government should step in. The same number (17%) believes the pensions regulator should be accountable.
Cyber-crime is becoming more sophisticated and everyone needs to play a role in fighting fraud. Fraudsters are accessing to personal information through cyber-attacks and illegally trading personal profiles online. Services like Experian’s web monitoring tool can help alert people to potential ID theft by monitoring the wider web and sending instant alerts if information they provide appears somewhere new online.
Organisations can also take steps to ensure that the people trying to access their pensions are the genuine recipients, such as checks to confirm a bank account belongs to a genuine policyholder or that an ID document is genuine.
In cases where fraudsters are offering to invest the cash into scams that can seem very convincing. Those who choose to invest should consider advice from an independent financial advisor, so that only reputable schemes or financial providers end up with their money.
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