Fraud Office to investigate pension liberation scams

25 May 2017   By Samantha Smith

THE Serious Fraud Office (SFO) have begun investigating a series of pension liberation scams, which have taken as much as £120 million in total from savers.

pension looking
Credit: Andrii Yalanskyi/

Dating back to 2011, the scams involved encouraging over 1,000 investors to move their pensions into funds supposedly being used to invest in storage pods. However, many of the schemes - including Henley Retirement and Capita Oak - were later dissolved, leaving affected savers some £120,000 out of pocket on average.

It has been implicated in certain parts of the media that such liberation frauds have been made easier by April 2015's introduction of Pension Freedoms, especially in light of how this March broke the record for the amount lost in a single month.

However, when taken annually, total losses from pension liberation scams have actually decreased since the freedoms were introduced, suggesting that these freedoms may have possibly had the reverse effect on overall levels of fraud.


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That pension liberation fraud isn't simply about 2015's Pension Freedoms is highlighted by how the SFO's investigation will stretch back to 2011, when the likes of Westminster Pension Scheme and Trafalgar Multi Asset Fund mostly began offering savers the chance to move their funds from their existing occupational schemes to those which promised greater returns.

The most notorious culprits were Capita Oak (COPS) and the Henley Retirement Benefit Scheme (HRBS), both of whom promised to pay savers 25% of their funds after their 55th birthdays.

Both schemes cold called retirement savers in order to make this promise, with COPS ultimately receiving £10.8 million from such savers between July 2012 and September 2013, and HRBS receiving £8.6 million between December 2012 and January 2014.

Because of this cold calling, and because they both made misrepresentations as to the rate of return they could guarantee investors, the trustees running them were wound up by the Insolvency Service in July 2015, barely three months after the Pension Freedoms were introduced.

Even though they were wound up, the SFO has nonetheless deemed their activities worthy of investigation, partly because much of the money they received - some £3.7 million in HRBS' case - has remained unaccounted for.


Yet despite the fact that the fraudulence of these two firms transpired before April 2015, the reporting of certain news outlets has implied that similar things are more likely to recur now that the Pension Freedoms are in place.

As a reminder, the Pension Freedoms enable retirement savers who reach 55 years of age to withdraw their entire pension pot, with the withdrawal of the first 25% being exempt from tax.

Superficially, this might suggest that, since savers can now withdraw their funds very easily, they'll be more vulnerable to pension liberation frauds and more likely to move their funds to new schemes offering too-good-to-be-true benefits.

However, it's just as plausible to argue the opposite, and to note that part of the reason why people fell for the kind of scam perpetrated by COPS and HRBS is that, prior to April 2015, they had little other choice if they wanted to "liberate" their funds.

When it comes to numbers of scams, this latter interpretation is the more accurate one, since the City of London Police reported a marked decline in the number of cases they recorded between February 2015 and February 2016.

This number fell to 640, which was down by almost 66% from the 1,883 cases recorded between Feb 2014 and Feb 2015.


Nevertheless, even with a drop in the number of cases, financial losses per case have increased since 2015. This is evident in how, between Feb 2014 and Feb 2015, £10.5 million was lost in total, while between Feb 2015 and Feb 2016, £13.2 million was lost.

PeriodNumber of casesTotal losses
February 2014 to February 20151,883£10.5 million
February 2015 to February 2016640£13.2 million

That the 2015/16 figure is higher is quite remarkable, given that there were only a third as many cases.

This underlines how, despite the reduction in frequency, pension liberation fraud is potentially more serious than ever.

As the head of pensions at Aegon, Kate Smith, said, "Savers must be on their guard. Promises of high returns or financial inducements are often scams and people falling for this type of investment scam run the risk of their lifetime's savings being lost in a matter of seconds".


Yet despite its seriousness, it would appear that little is being done about the risk of the fraud, aside from the SFO's investigation itself.

The Government had planned to place a ban on cold calling, so as to "cut off a key source of pension scams".

Unfortunately, their response to a consultation that closed in February has been delayed by the calling of the snap general election.

This means that, even with the investigation, potential scammers will be just as able to defraud savers as they have been for the past few years. And ultimately, this is why savers should be as careful as ever when receiving a call from someone promising to "liberate" their pensions.

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