How to avoid pension scams
Fraudsters target UK-based pension schemes with lure of high returns to transfer to NZ.
Photo / Supplied.
Photo / Supplied.
Expat ‘Brits’ thinking about transferring their pension schemes to New Zealand are being urged to watch out for scammers looking to fleece a share of their nest eggs.
Authorities both here and in the UK say the increasing possibility of being taken in by pension scammers - a fraud that could cost someone’s entire life savings - often begins after people receive a ‘hard-sell’ cold call out of the blue.
An Auckland-based company whose management and staff have completed over 20,000 pension transfers from Britain in the last 20 years, Britannia Financial Services Ltd, says people need to be careful about who they take advice from when thinking about moving their retirement scheme.*
Britannia director Alun Rees-Williams says a surprising number of people don’t know how much they have tied up in their plans - one client who thought he had $400,000 was surprised to find he actually had $800,000 - and fraudsters look to take advantage of this.
“Cold callers can put pressure on people, typically suggesting they invest funds with them but don’t disclose how the funds are to be invested or where,” he says. “These plans often attract high transfer costs, high annual fees and high exit costs.
“We hear of people being charged extremely high transfer fees and then offered a financial rebate of some of the fees –this is what’s known in the UK as an unauthorised withdrawal which will attract penalties from the UK government of 55 per cent of transfer. Any offer to allow cash withdrawals before age 55 amounts to a scam and will attract the 55 per cent penalty.”
Uncertainty around the political situation in Britain in the wake of Brexit is one factor helping to bring the issue into sharper focus for many with UK pensions.
A UK government-funded organisation, Money Advice Service (MAS), says scams come in all shapes and sizes but all have the same effect – you lose your life savings. As a result it recommends researching any company you are considering working with.
So, what are some of the tell-take signs of a possible scam? The MAS lists the following:
- Cold calling, text messages, emails or visits in person –if someone gets in touch about your pension, and you didn’t ask to be contacted, this is a big red flag. Stop communicating and don’t take them up on their offers.
- A firm won’t allow you to call them back – if they say this, it’s likely they are a fraudster. Regulated pension advisors will always let you get in touch at a more convenient time.
- Poor contact details – even giving details for calling back doesn’t mean they are genuine. If the number is a mobile, or the delivery address is a PO Box, the alarm bells should start ringing.
- Promises to unlock your pension when you’re under 55 –most who take money out before the age of 55 will not only have to pay the 55 per cent tax on the money, but also a huge fee to the company that arranged it. The only time you can get to your pension early is if you have a serious health problem.
- Offers of high return, low risk – a warning sign something is not legitimate and usually a hollow promise to get you to hand over lots of your savings.
- Tell-tale fraudster words to watch out for – pension liberation, pension loan, loophole, free pension review, one-off investment, overseas, ethical, ‘new’ industry among them.
*There are many “for” and “against” reasons for transferring a UK pension. For a list of pros and cons, and for more information, please go to: britanniafinancial.co.nz/uk-pension-transfer-benefits
Disclosure Statements for Britannia’s Authorised Financial Advisers are available on request and free of charge. Phone 0800 663 663. The Product Disclosure Statement for the Britannia Retirement Scheme is available from Britannia Financial Services Limited at: britanniafinancial.co.nz