Anyone can be the victim of a pension scam, no matter how financially savvy they think they are. It’s important that everyone can spot the warning signs.
Scammers are often convincingly professional, with credible websites, testimonials and materials that are hard to distinguish from the real thing. Their aim is to persuade pension savers to either transfer their entire pension savings, or release funds from it. This is often to a scheme the scammer controls.
Cold calling about pensions is illegal and likely a sign of a scam.
Some scammers have moved to sophisticated online models, making contact through social media or by using friends and family to reach clusters of people. Others rely on established practices like offering a ‘free pensions review’.
Common signs of pension scams include:
- phrases like ‘pension liberation’, ‘loan’, ‘loophole’, ‘savings advance’, ‘one-off investment’, ‘cashback’
- guarantees they can get better returns on pension savings
- help to release cash from a pension before the age of 55, with no mention of the tax bill that can arise
- high pressure sales tactics – time limited offers to get the best deal; using couriers to send documents, who wait until they’re signed
- unusual high-risk investments, like property, renewable energy bonds and forestry, many of which tend to be overseas, making it difficult to check ownership or even whether the investment exists
- complicated investment structures
- fixed-term pension investments which often mean people do not realise something is wrong for several years
What You Can Do to Protect Yourself from Scams
The Pensions Regulator suggests four simple steps that you can take to protect yourself from pension scams.
1. Reject unexpected offers
If you’re contacted out of the blue about your pension, chances are it’s high risk or a scam. Be wary of free pension review offers. A free offer out of the blue from a company you’ve not dealt with before is probably a scam. Fortunately, research (from FCA Financial Lives) shows that 95% of unexpected pension offers are rejected.
2. Check who you’re dealing with
Check the Financial Services Register to make sure that anyone offering you advice or other financial services is FCA-authorised.
If you don’t use an FCA-authorised firm, you also won’t have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme. So you’re unlikely to get your money back if things go wrong. If the firm is on the FCA Register, you should call the Consumer Helpline on 0800 111 6768 to check the firm is permitted to give pension advice.
Beware of fraudsters pretending to be from a firm authorised by the FCA, as it could be what we call a ‘clone firm’. Use the contact details provided on the FCA Register, not the details they give you.
3. Don’t be rushed or pressured
Take your time to make all the checks you need – even if this means turning down an ‘amazing deal’. Be wary of promised returns that sound too good to be true and don’t be rushed or pressured into making a decision.
4. Get impartial information and advice
MoneyHelper – provides free independent and impartial information and guidance.
Pension Wise, is a service from MoneyHelper, backed by the government – If you’re over 50 and have a defined contribution (DC) pension. Pension Wise offers pre-booked appointments to talk through your retirement options.
Financial advisors – It’s important you make the best decision for your own personal circumstances, so you should seriously consider using the services of a financial advisor. If you do opt for an adviser, be sure to use one that is regulated by the FCA and never take investment advice from the company that contacted you or an adviser they suggest, as this may be part of the scam.
What We Do to Protect You from Scams
- Regularly warn our members about pension scams
- Undertake training from The Pensions Regulator (TPR) to know the warning signs of a scam and best practice for processing transfers
- Take appropriate due diligence measures by carrying out checks on pension transfers which includes a robust Red, Amber and Green flagging system
- Clearly warn members who insist on high-risk (Red flag) transfers being paid
- Use the resources on the Financial Conduct Authority (FCA) ScamSmart website, TPR scams information and the Pension Scams Industry Group (PSIG) Code of Best Practice
- Report concerns about a scam to the authorities and contact you if we have concerns about your pension transfer
Links on this page are to external websites which may not have Welsh translations available.
