Pension scams

Falling for pension scams can often be an isolating and scary experience however keeping up to date on the latest scams can help mitigate this. Whether you have already retired, or your retirement is still some years off, knowing how to protect your money can save you a lot of potential heartache.

What you need to know about pension scams:

  1. Types of Pension Scams
  2. How to spot Pension Scams?
  3. Pension scam guidance
  4. What to do if you think you have been scammed?

Types of Pension Scams

Free pension review: It is often said “You get what you pay for”, that’s why it’s important to be cautious with businesses that offer free pension reviews. Often they’re incentivised in other ways whether high fees or recommending unsuitable companies for a commission.

Early withdrawal: Unless you are in poor health, you cannot take your pension until you are 55 (57 from 2028). Scammers usually offer ‘liberation’ or ‘loans’ that allow you to borrow from your pension. The funds will be transferred into a scheme controlled by the scammer. They may charge an initial fee, of as much as 30%. After fees and tax, the remaining money will then be invested in high-risk products or just stolen.

Elderly Woman Crying While on Phone Call. The lady hights the stress caused by Pension scams

You could need to pay a lump-sum withdrawal tax of 55% even if;

  • You didn’t realise you’d broken the tax rules 
  • You put the money back into your pension 
  • You’ve paid fees or charges to the company involved 
  • You’ve spent all the money 

Defined benefit Transfer / Quick cash – one of the most common pension scams of recent times due to it being legal. Firms would encourage clients to transfer their lucrative defined benefit schemes for a relatively smaller lump sum.

Alternative investment: Like the free pension review, the seller will encourage you to invest in ‘high return’ or ‘exotic’ (risky) investments. In return, the seller will receive a commission or be behind the company being invested in.

Multi-company fee: Your funds will be passed through a network of managers each taking a fee.

How to spot Pension Scams?

Unsolicited messages (Cold calling) about pensions are ILLEGAL. It is highly likely that anyone contacting you this way is carrying out a scam. If it’s too good to be true it probably is. If an investment offers returns or access beyond what is realistic – it probably is.

Pressure to act fast. There is no good reason for acting rashly, if you don’t act the worst that can happen is that your situation stays the same. The worst thing that can happen if you do act is that you lose everything.

Here are tips to look out for when trying to spot a scam:

  • Phone calls from a mobile or overseas number.
  • An email address from a Hotmail, Outlook or Gmail account.
  • Communications containing spelling mistakes and poor grammar. 
  • The addresses provided are solely PO Boxes.
  • Website addresses that have minor spelling changes based on genuine sites

Phrases to look for;  ‘pension liberation’, ‘loan’, ‘loophole’, ‘savings advance’, ‘one-off investment’, ‘cashback’, ‘overseas’, ‘high-returns’

Pension scam guidance

It’s not your fault – Scammers are professionals, they practice and train to maximise their success in taking other people’s money.

An elderly lady with her granddaughter sat together on a bench. This picture shows that taking the time to ask the people around can be a pivotal part of avoiding pension scams

Don’t be afraid to take it slow – With a genuine and suitable product, the seller should allow you to take time to think about their offering and give you the opportunity to discuss it with your financial adviser/planner.

Banks DO NOT need your permission to protect your money – If your funds need to be transferred for safety THEY will act.

The Police, MI5 or other agencies WILL NOT recruit members of the public to aid in preventing crime.

Any genuine firm operating with pensions will be regulated with a FCA register number, this can be checked with the FCA. On this website, you can check the company’s details and what activities it is allowed to conduct.

What to do if you think you have been scammed?

  1. Contact Action Fraud on 0300 123 2040 and explain your story.
  2. Let your Provider/adviser know! They cannot act on what they do not know. Start by contacting your provider/adviser with a different phone than you talked to the scammer on, or a different computer if they have had access to it.
  3. If you have allowed remote access to your phone or computer, contact a computer specialist/repair shop.

If you are worried about a potential scam or may have been contacted by a fraudster, contact the financial services regulator (FCA) on 0800 111 6768 or their website.

To check if it is likely that an interaction was a scam attempt go to ScamSmart

If you are worried about pension scams or not having a suitable pension please don’t hesitate to contact us on 01903 534587.