The Insolvency Service has shut down five pension liberation firms in the 2015/16 financial year, following investigations about suspected savings scams.
Investigations found the companies had obtained more than £128m from members and by shutting them down, the Insolvency Service prevented a further loss of at least £107m.
The Insolvency Service said also planned to prevent the directors of such scam companies from setting up new companies where there has been evidence of wrongdoing.
The director of Carrington Wire Limited (CWL), for example, was disqualified for 12 years in November 2015, as the company failed to meet defined benefit pension scheme obligations. The Insolvency Service also found the firm facilitated a series of transactions that enabled an unconnected Russian company to also avoid pension scheme obligations.
Scam target
Following the introduction of pension freedom in April 2015 by the government gave more flexibility to access savings but this also left savers susceptible to scammers keen to get access to these funds.
Earlier this year the Financial Conduct Authority (FCA) reported over-55s were increasingly targeted by scammers for unregulated investments. It found scammers enticed older investors through the promise of ‘high returns’ on unregulated products such as wine, diamonds and land.
The FCA surveyed 2,301 UK residents over-55 in February and March this year as part of their ScamSmart campaign, through which it found a sharp rise in unsolicited investment calls, the most common tactic used by fraudsters.
Of those surveyed the regulator found those over-65 and with savings of £10,000 or more were three and half times more likely to be the targets of investment fraud.
The study also revealed that the low interest rate environment was one of the key reasons why older generations considered investing in a wider range of unfamiliar types of investment products in the last 12 months.
A call for action
Aegon head of pensions Kate Smith welcomed the actions of the Insolvency Service but said: “Much more needs to be done and the government and regulators have to be seen to act quickly to protect people and stop pension liberation firms being set up in the first place.
“Simply preventing directors of these firms setting up new firms is a totally inadequate response; much greater sanctions to act as a deterrent are urgently needed.”
She called for greater collaboration between the government and regulators, as “unfortunately ultra-low interest rates and volatile stock markets open up another opportunity for scammer firms to tempt people to move their pension investments overseas or into highly unusual and risky investments with the promise of unrealistically higher returns”.
The post Insolvency Service shuts five pension liberation firms appeared first on Retirement Planner.