LONDON (Reuters) - British lawmakers said on Tuesday they were launching an inquiry into pension scams following a relaxation in pension rules five years ago that has increased the scope for fraud, a problem likely to get worse during the coronavirus pandemic.
Under so-called pension freedoms introduced in 2015, over-55s have been able to choose how they spend their pension pots, rather than being forced to buy an annuity, which gives a fixed income for life.
Industry sources say the changes have encouraged investment in other financial products that offer higher returns than annuities, but have also increased the scope for scams.
“More flexibility means more potential for the unscrupulous to take advantage and scam savers out of what will very often be their largest financial asset, crippling their dreams of a comfortable retirement,” said Stephen Timms, chair of the work and pensions committee of lawmakers.
Some 180 people reported they had been the victim of a pension scam in 2018, losing on average 82,000 pounds each. Regulators believe only a minority of pension scams are reported, the committee said in a statement.
The coronavirus pandemic is likely to lead to a further increase in scams, said Andy Agathangelou, founder of Transparency Task Force, which lobbies for reform of financial services.
“People are suffering from lack of money, there’s an increasing lack of confidence in the pensions industry and scammers are getting ever more sophisticated.”
The work and pensions committee is seeking written submissions on pension scams by Sept. 9.
Reporting by Carolyn Cohn; Editing by Kevin Liffey and Nick Macfie