Pension warning: Man devastated as he loses final salary pension after cold call | Personal Finance | Finance
Fraud now accounts for more than a third (39 percent) of all crime according to figures from the Crime Survey for England and Wales (CSEW) for 2021. While everyone is being targeted by fraudsters, pension scams are also becoming more commonplace. One man told BBC Morning Live earlier today how he lost thousands of pounds after falling for a convincing pension scam.
Kevin could have retired at 55-years-old if he’d stuck with his previous pension company but wants to warn others after falling victim to pension misadvice.
Initially, the fraudster contacted Kevin ‘out of the blue when he cold-called him asking if he had any “frozen pensions”.
The lorry driver replied that he had a frozen pension from 15 to 20 years ago and was then asked if he’d like to benefit from a free review.
After Kevin agreed, the man came to his house and looked through his existing paperwork before incorrectly convincing him his previous company couldn’t be trusted and he might end up losing his pension if he stayed with them.
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He was then advised to transfer his pension to a private one with the promise of much better returns.
Kevin said: “He did say, ‘If you transfer it over, all we charge is a five percent transfer fee’. At that time I didn’t know how much the pension was worth – it was actually worth £242,000 ’cause it’s a final salary pension.
“The fee for the transfer was £12,000 which they initially took. Then each year they would take £1,500 from the pension for looking after it. When I got the letter from the new pension it had gone into, at first I was angry. I thought I’d been ripped off basically.
“I was on the phone to him, ‘You’ve took £12,000 for referring it’. I said ‘that’s a lot of money just for some keying about on a keyboard.”
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On top of this, Kevin lost his Defined Benefits Scheme, also known as a final pension salary scheme, which would have provided him with an income for life.
Kevin added: “If I’d stayed with that company that was doing the pension I could have retired at 55.”
Pensions cold-calling was banned in 2019, and it means those affected by the issues could be due compensation. Thankfully, Kevin has been repaid the money he has lost due to the misselling.
Unfortunately, scams like these are common – pension holders are often cold-called or sent a letter over email, or through the post, offering them a free pension review.
Sometimes they are even told they can take cash from their pension even though they’re under 55.
In some instances the victim might be ‘loaned’ an amount, often around half of their pension, with the company involved taking a fee, often as much as 30 percent.
The Financial Conduct Authority (FCA) issued a warning earlier this month urging people to be wary of pension scams.
On its website, The FCA states: “You should be very wary of any scheme offering to help you release cash from your pension before you’re 55, as it’s almost certainly a scam.”
“Generally, you can only take money from your pension when you’re 55 or older except in certain circumstances, like having a terminal illness.”
The FCA continued: “You could face a tax bill of 55 percent, plus other charges, on what you withdraw – and you could also lose all your money.
“Any money remaining in the scheme after fees and tax are paid will then be invested in high-risk products or projects like overseas property developments – or it’s sometimes simply stolen outright.”
The 55 percent tax will have to have paid even if the person has no idea they have broken tax rules.
The FCA said the safest thing to do is hang up if someone receives a cold call about a pension, as it’s illegal and probably a scam. People can report pension cold calls to the Information Commissioner’s Office (ICO), here.
Morning Live airs weekdays on BBC One from 9.15am.
