AJ Bell warns of pension scams during Covid-19 crisis

AJ Bell has urged pension savers to “be on their guard” against a potential surge in scam activity during the period of economic uncertainty caused by the coronavirus pandemic.

The investment platform suggested fraudsters were already seeing the Covid-19 crisis as an opportunity to prey on vulnerable people, quoting figures from Action Fraud that reported a 400% increase in scams linked to the virus in March.

UK Finance also revealed this week that the banking and finance industry had stopped over £1.8bn of fraud in 2019, a figure that was up by 9% on the previous year.

AJ Bell senior analyst, Tom Selby, suggested that while the country focuses on slowing the spread of coronavirus, the economic fallout will “inevitably lead to an increase” in the number of vulnerable or potentially vulnerable people in the UK.

“In such an environment, unscrupulous scammers will already be plotting ways to take advantage during what for many will be a time of serious financial strain,” Selby commented.

“Scams claiming to allow people early access to their retirement pots could come back to the fore if we see a surge in unemployment placing immediate pressure on household incomes.

“While getting access to your pension before age 55 may be tempting during this period of uncertainty, doing so will as a minimum see you hit with a 55% unauthorised payment charge from HMRC in the first instance.

“At best, you’ll then be subject to sky high fees by the fraudster as well, meaning you only get a fraction of your pension back and your retirement prospects are left in tatters. Many people lose everything as a result of these types of scams.”

AJ Bell suggested the onus should be on savers to protect themselves, and urged people to watch out for investment “opportunities” that appear out of the blue or sound too good to be true – highlighting that schemes offering “high guaranteed returns” are often at the heart of pension and investment scams.

The investment platform also said savers should be “extremely wary” of anyone offering free advice, a free pension review or early access schemes.

“Scammers’ tactics are evolving all the time, and increasingly we see complex schemes promoted online through social media,” Selby added. “This virtual Wild West is a natural home for fraudsters, with governments around the world struggling to create meaningful protections for consumers.

“Everyone from the Police and regulators to providers and charities has a role to play in tackling pension scams. However, the best way to protect your pension is to arm yourself with the tools and knowledge to spot the telltale signs of a scam.”

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