Action Fraud warns the elderly and retiring to be on their guard against pension scammers after their retirement pot. The task force also warned that scammers are using different tactics to swindle money from the elderly.
The elderly’s retirement pots are most vulnerable today after the government had liberated pension pots completely. Regulators fear that the criminals are using the changes to swindle the pot by tricking them into cashing out coupons and other tactics.
Pensions Minister Baroness Altman said:
“I cannot urge people enough: just hang up. No bona fide company will ever cold call you about your pension.”
She said most of the schemes are attractive offers from seemingly-legitimate companies with properly-voiced personnel talking on the phone.
She added: “The criminals behind this illegal activity often lay a sophisticated trap complete with glossy brochures and professional websites that make them look highly credible. Don’t fall for it.
“Their aim is to catch you off your guard so they can steal your hard-earned savings. Scammers wreck people’s lives; it really is as plain and simple as that.”
Victims range from just losing £1000 to those losing almost £90,000 of their pension.
The new pensions liberation law had taken effect last April. Despite the scammers’ bids, legitimate service providers also fail to warn the elderly about the high tax rates involved in liberating pension pots.
According to consumer champion Which?, financial firms are charging as much as £270 a time to allow retirees to access their retirement pot. Those entering income drawdown can be charged as much as £26,000 over a decade even if they don’t want to get all their pensions out.
“We believe giving retirees complete control over their pension savings is the right thing to do, but clearly more needs to be done by the industry to make pension freedom a reality for many people,” Which? said.
Pension freedom, which allowed retirees to cash out their entire pension for reinvestment, started in April 2015. It had since made retirees a prime target for scammers who intend to cash out the entire retirement pot.
Research from Which? found that people making one-off withdrawals from their pension can be charged £270 for the first withdrawal each year.
Pension service providers such as Charles Stanley Direct could charge more than £200. James Hay can charge for £100 Barclays Stockbrokers, Halifax Sharedealing and TD Direct charge more than £90 per transaction.
Baby Boomers are the ones mostly hit hard by the 2008 financial crisis. With no way to save enough for their pensions, they needed to retire at a later time. Leaving nothing for themselves at the age of 45-50, it was still too late to save.
However, saving about £86 monthly can help you save enough to live a financially comfortable retirement.
According to research, a basic income of £12,590 yearly or at least £242 weekly is enough to help retirees survive their retirement. By saving just an £86 monthly you ease a £6034 budget hole.
Researchers say that typical baby boomers in the UK have saved for pensions that average about £53,793 annually. This helps to give them enough for income retirement with £3117 yearly. If you enter a drawdown plan, you could save about £3635.
If you had saved about £50,000 for your pension, you could just use an additional £86 to take care of a huge gap. If you’re 10 years older, you need to save more than double the amount at £178 monthly.
You could just increase your pension contributions with the amount you save.
Try it and see where it would take you.
Want to cash in your pensions? Don’t be in such a hurry. You might be paying for very high pensions fees and you don’t know it.
Scottish Widows is one of the many providers who could gain about £26,500 in fees, which is over 10 per cent of the original pot. Insurers would regularly only take about £16,300.
Along with Scottish Widows is Aviva and Prudential with huge fees more than £25,300.
Consumer group Which? continues to warn savers that they may be charged up to five types of fees on a single savings account. Service providers usually charge £280 in set-up charges, £270 for every withdrawal and £3000 in annual fees.
The consumer group’s report looked at six pension companies and 12 investment brokers. Savers can now take lump sums whenever they like from their pension pots. They could use this money to set up a regular cash withdrawal while they leave some to be invested.
Analysts say that it is a great move by Chancellor George Osborne to trust people with their money. However, it is another problem to have pension firms treat their consumers properly.
The one mistake that Baby Boomers had that left them working past retirement was the proper allotment of pension. In the early days of employment, the companies took the responsibility of handling their employees’ pensions. As new rules put the responsibility on the shoulders of employees, the burden may have been too much for the baby boomer generation, leaving them with much to learn with so little time.
To avoid this little problem, here are three things that you need to know.
Review Your Expenses
Baby boomers need to know about how much they’re spending on a daily, monthly and yearly basis. A good overview of expenses allows you to cut on some areas to make sure you account for things that could possibly change after your retirement.
Without an active income source, you’re going to need to cut down on your expenses and save up for additional pensions and other financial assets. List them down and this will allow you to calculate the maximum possible income available to you.
There’s no sense in saving for your pensions if your returns are not as quick or as big as they may seem. A very high interest rate in a pensions fund may be great news, but sadly, you must take account for inflation.
The difficulty is that nobody actually knows the value of inflation at present at any time. However, it helps to focus on the difference between the inflation rate and investment returns. Always set a bigger margin to account for the possibility of deflating values of your investments.
If your assets are cash or near cash before your retirement date, you’re quite safe if you plan to retire today. However, keep in touch with the latest economic developments so you know when to cash your own funds and when to consider an annuity purchase.