Angela Brooks, chairman of the organisation, which helps victims of pension liberation scams, warns that many of these schemes use financial advisers who are regulated by the UK’s Financial Conduct Authority (FCA) to persuade people to sink their pension savings into unregulated investment products.
She told International Adviser that such scams are on the rise since the introduction of the pension freedoms in April last year.
Pension Life is currently working with over 800 investors, some of whom are British expats living in Spain and Dubai, who have been scammed by fraudulent investment schemes which have lost them a combined £1bn ($1.3bn, €1.2bn).
Earlier this month, the FCA voiced concerns about the “inappropriate influence” that unauthorised introducers have on investment choices made by UK advisers, revealing that it has seen a growing number of cases where client pensions are being transferred into unregulated high risk products.
"But in all cases they just get on with their next scam but make it craftier, cleverer, more sophisticated and profitable (for them - not the victims).”
The regulator found that some IFA firms had “lost control over the final outcome of advice” on pension switches and transfers, which have increased in the wake of the pension freedoms, describing many of the investments recommended as “outright scams”.
However, Chris Lean, a financial adviser based in Czech Republic, who specialises in international pensions, told IA that regulation has done little to help the victims of such fraud.
“When someone has been scammed and complains to the firm, the firm will either ignore the victim or confuse the victim with regulatory jargon to dismiss the complaint.
“The victims then contact the regulator, only to be told that the firm was not regulated to give investment advice and there is no recourse to the Financial Services Compensation Scheme (FSCS) and this is particularly likely if the firm is outside of the UK,” said Lean.
He added that legitimate IFAs in the UK have been “deluging the regulators with evidence of malpractice but relatively little seems to be changing.”
Meanwhile, Brooks reveals that many of the scams she has encountered have been operated by a select group of sophisticated criminals, well-known to regulatory authorities, who instead of being convicted of fraud carry on setting up multiple schemes once a scam is discovered.
“Nobody stops these people with many scams still doing a roaring trade selling financial ruin to thousands of innocent victims.
“History tells us that the people behind scams run for cover when the schemes collapse and in only one case has one of them come forward to help the victims. But in all cases they just get on with their next scam but make it craftier, cleverer, more sophisticated and profitable (for them – not the victims),” said Brooks, a former tax adviser.
Pension liberation scams
The findings come just days after the UK’s Insolvency Service revealed it had shut down five so-called pension liberation companies over the past year, after they scammed pensioners out of £128m.