Pension liberation fraud 'triples' - but new freedoms might not be to blame
29 Jul 2015
It has been reported that in the month following the introduction of new pension freedoms, liberation fraud more than tripled. However, despite appearances, the rise may not be directly caused by the new rules that came into effect in April.
Figures from Action Fraud - a division of the City of London police - show that members of the public reported losses of £4.7m in May - compared to losses of £1.4m in April, and £932,000 in March.
In a typical scam, fraudsters contact people with pension pots and persuade them they can release the money for a fee, but without clarifying the tax implications, such as that following the pension reforms, those over 55 are liable for income tax on 75% of their savings. Anyone whose income exceeds £150,000 in one year - including money withdrawn from their pension pot - could have to pay up to 45% in tax.
Action Fraud figures show that, on average, victims lost £60,500, which includes the amount the victims owe in tax plus the fee they have paid to the fraudsters.
However, the actual number of reported cases of pension liberation fraud has fallen. There were 78 cases of reported fraud in both May and April, down from 82 in March, and 240 in February.
A spokesperson for Action fraud said it was ‘difficult to draw any conclusions’ about the effect of the pension reforms on fraud. Most victims do not realise until some time afterwards that a fraud has been committed, so cases reported now often occurred months or even years in the past.
The pensions minister, Baroness Ros Altmann, said she was ‘not convinced’ that the pensions freedoms have led to a rise in fraud, telling the BBC: ‘People are a lot more aware of it, and are starting to report it. It can take a long time for people to realise they've lost their money.’
Speak to us about how the pension reforms affect you and your tax position.