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Scam fears grow as pension freedom day nears

Fears that unregulated financial advisers will step up the marketing of unsuitable products following the introduction of UK pension freedoms next week are growing.

Scam fears grow as pension freedom day nears

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Nearly two out of every five advisers surveyed by international life company Prudential said they were worried their clients could become targets.

While a Daily Mail investigation revealed that private financial information on people’s pension pots and income is already being passed on by firms without their customers’ knowledge. The paper said this data is then repeatedly sold on, ending up in the hands of fraudsters and cold-calling firms.

The Prudential survey found that advisers believe the biggest threat linked to the new pension freedoms, which come into effect on Easter Monday, remained the risk of retirement savers running out of money after cashing in their funds. However, it discovered widespread concern about clients taking unsuitable products.

The new pension rules will allow savers over 55 unlimited access to their defined contribution savings schemes replacing a previous system which had largely forced them to purchase an annuity.

According to Prudential, more than six out of 10 advisers believe the risk of savers buying unsuitable retirement income solutions was a major worry.

“There are clear risks for people being targeted by unregulated providers offering solutions which seem to promise better returns without explaining potential risks,” said Vince Smith-Hughes, a retirement expert at Prudential.

Advisers were more optimistic that their clients will not be targeted by risky offers from unregulated firms. However, 86 percent believed retirement savers in general will be targeted, Prudential said.

Data for sale

The Daily Mail investigation revealed that one its reporters had been able to buy data on 15,000 individuals, which included details of their salary, pension pots and investments.

When it contacted some of the 15,000 on the database, they revealed that they already been inundated with cold calls from conmen who seemed to know their highly sensitive personal information.

In a separate investigation The Daily Telegraph reported it had found some companies were preparing to charge hundreds of pounds for basic services provided to investors seeking access to the defined contribution savings pots.

The Telegraph said some customers will pay as much as £400 just to have the fund paid out in cash. Savers who want just part of their pension will incur fees of as much as £150 per withdrawal, with some companies limiting customers to just one free withdrawal a year.

The worst case uncovered in the research will see savers who make six withdrawals from a £100,000 pension pot billed as much as £3,286 a year.

 

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