Tax reforms that took place in April 2015, enabling pension savers to access their
money easier than ever before, had a dramatic effect on the industry last year.
With a continuing increase in pension scams and further changes to legislation likely, the issue of pensions looks set to be just as lively in 2016.
The 2015 changes in practise
Although some savers have been prevented from accessing their funds due to providers putting stop-gap limitations in place, the issue of pension scams for those who have accessed their money early shows no sign of slowing down.
In spite of the Chancellor playing down pension fraud fears back in March, we are still hearing of new scams on a regular basis. The campaign group ACA Pension Life has warned people to be mindful when approached by a company advising you how to invest your money.
Following feedback from individuals who have already fallen prey to pension scams, should you hear the terms ‘sophisticated investor’, ‘legal loophole’, or ‘free’ at any point when discussing your financial options, think very carefully about whether you wish to proceed. We would add to this the old adage that should a deal seem too good to be true, it almost certainly is.
Another feature of 2015 has been that of mis-sold pension investments, mainly through the vehicle of Self-Invested Personal Pensions (SIPPs). As reported throughout 2015, we have worked on countless cases where clients have been caught up in investment scams where a SIPP was involved. Usually a client is approached with an investment opportunity promising high returns and they are encouraged to transfer funds via a SIPP.
Potential changes in 2016
Although the government’s auto-enrolment policy looks set to dominate the pension headlines in 2016, the SIPP problem is likely to continue to hit the headlines. Providers of SIPPs are being faced with an increase in regulatory charges and falling bank rates, so SIPP changes appear to be inevitable. SIPPs themselves are not necessarily the problem, rather it is when they are used by scammers and unscrupulous financial advisers as a vehicle to relieve people of their hard earner money
The large, established SIPP firms are likely to find a way to adapt to a rise in their outgoings, but many smaller SIPP companies may not be able to keep up with the increased charges. As suggested by financial analysts Money Marketing, this could mean passing the cost on to their investors, or folding completely.
Ultimately, if costs continue to rise for SIPP providers, the actual monetary gain attached to a SIPP may become so low as to not be worthwhile for all but the wealthiest of savers. Also worthy of consideration is that, should SIPP companies fold as a result of the changes, many people could lose their existing investments overnight.
With more SIPP changes to come from the government and plenty of pension scams still in operation, we will be keeping a close eye on developments within the SIPP and pension sector in 2016.
If you feel you may have been the victim of a pension scam or mis-sold an investment, TLW Solicitors can help.
Fill in our enquiry form, email us at info@tlwsolicitors.co.uk or call us free on 0800 169 5925.
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