The frauds, which affected 500 British investors, involved persuading people to transfer their pension savings into unregulated products, such as storage pods and a loan company.
In one case, two companies – KJK Investments and G Loans – worked together to get investors to take out a loan from G Loans on the condition that they used their existing pension funds to buy shares in KJK.
Last June, the two firms were liquidated by the High Court after the Insolvency Service found the companies did not disclose that the loans were actually being funded directly by the pension savings invested in KJK Investments – meaning investors were essentially borrowing from themselves.
Promised a return of 6% per annum, the scam lured in 209 investors who lost a total of £11.9m.
Meanwhile, the other three companies – Imperial Trustee Services, Omni Trustees and Transeuro Worldwide holdings – persuaded pensioners to invest in storage pods via occupational pension schemes and self-invested personal pension schemes (Sipps).
The companies conned 289 investors out of £116.5m by persuading them to buy a long lease on a storage unit or pod – containers that are used to store belongings – and rent it out in the hope of making a good return which seldom worked out.
In January 2014, UK regulator the Financial Conduct Authority (FCA) issued a consumer alert naming store pods as “high risk”.
The Insolvency Service told International Adviser the scams involved a larger number of victims who have yet to come forward.
“Conservatively we are aware of 289 clients affected by these three linked schemes but there were certainly a greater number affected,” said a spokesperson for the watchdog.
Low interest rates
Kate Smith, head of pensions at Aegon, welcomed the news that government agencies are starting to close down pension liberation firms that have “scammed people out of thousands of pounds of their hard-earned savings”.
She warned that these types of scams in particular attract savers who have suffered from years of rock-bottom interest rates and market volatility which have resulted in poor returns.
“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.”
Smith believes “much more needs to be done” to protect people from these fraudsters, urging regulators to bring in greater deterrents.
“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 added.
In May, the FCA warned that Britons over-55 are increasingly being targeted by fraudsters, in the wake of the pension freedoms which were introduced in April last year giving people unrestricted access to their pension pots.
Just a month earlier, the regulator said a crackdown on pension-related investment scams is one of its main priorities for the coming year.
Data from the watchdog’s ScamSmart campaign found that nearly half of Britons aged 55 and over are investing in unregulated products such as wine, diamonds and land, without getting professional advice.