From April, many older people are suddenly going to have access to rather large pots of cash. That's when Chancellor George Osborne's pension freedom reforms kick in, which will allow the over-55s to take all of their pension as cash if they wish.

This has freed them from the long-standing obligation to buy an annuity, an income for life, with their pot. Most pensioners have welcomed the move, because it gives them absolute control over their own money. For some, however, the reforms will backfire horribly, because they look set to unleash a tsunami of fraud.

The prospect of lots of older people suddenly having tens of thousands of pounds at their disposal is just too tempting for the financial sharks to resist. In fact, they are already circling. Almost two in five people have received messages via email or text, inviting them to review their pension or release some of it as cash, according to new research from closed life fund consolidator Phoenix Group. Worryingly, 26% said they were tempted to take up the offer, and 15% had actually replied.

Please, please, don't respond to any of these messages, because you risk losing a lifetime of pension savings if you do.

Cold callers don't have your best interests at heart, quite the reverse. They want to raid your pension pot, and keep it for themselves. Many are offering to liberate your pension if you're under 55, even though more than half will instantly disappear in punitive taxes to HM Revenue & Customs.

Fraudsters will lure you in by offering to divert your pension into exciting investment schemes offering market-beating returns. But that's not what you'll get. Your money will disappear in charges, which can be as high as 30%, while that thrilling investment opportunity will evaporate at some point, along with your money. At that point, the fraudster will stop returning your calls, and your retirement dreams will have gone up in smoke.

Phoenix has already recovered £21 million in potential liberation fraud, from nearly 1,000 people. From next April, the feeding frenzy will really begin. I have already spoken to people who have been targeted by the fraudsters, and nearly caved in to their pressure sales tactics.

  • Protect yourself by refusing to answer those texts or emails, or putting down the telephone.  
  • Be particularly aware of anybody offering "free government guidance", this is part of the scam, to fool you into thinking they have official backing.
  • Resist pressure to sign anything in a hurry, especially if the crooks courier the documents to you and request a quick signature. Once you transfer your money, it's too late. Your pension will no longer be yours.
  • If suspicious, contact Action Fraud on 0300 123 2040

Enjoy next year's pension freedoms, but remember, freedom can also come at a price.

Read more articles by Harvey Jones here

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