Pension scams: what to look out for

Most of us are no strangers to scams, but what about when it comes to clever pension scams? We take a look at the problem and how you can protect yourself.

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Most of us are no strangers to scams. And while many of us are on high alert when it comes to dodgy-looking emails, what about when it comes to our pensions? Here, we take a look at the scale of pension scams and what to look out for.

How big is the problem?

In 2018, 180 people reported a pension scam to Action Fraud, which may make it seem a minor problem. But according to the Financial Conduct Authority (FCA), the victims lost an average of £82,000 each. Worryingly, the FCA say it’s possible only a fraction of these scams are reported.

Further research also reveals that there could be as many as eight scam pension calls every second. Plus, more than eight million individuals reported being offered unsolicited pension advice or reviews between 2015 and 2016.

The latest figures from the Office for National Statistics (ONS) show that pension wealth in the UK stands at £6.1 trillion. For scammers, that represents rich pickings. 


What pension scams are out there?

It’s thought there are four main ‘types’ of scams. Let’s take a look at them in more detail.

1. Liberation scams

These promise to release your pension before you’re 55 years old. In reality, the money ends up in someone else’s unauthorised account. 

2. Investment scams

Scammers persuade you to invest in an opportunity with ‘high returns’. These opportunities are very often overseas investments, which can make them even harder to trace.

3. Review scams

Fraudsters offer to review your existing pension. These types of scams typically target younger pension holders aged between 45 and 54 years old. The aim is to gather personal information and trick you into giving the scammers authorisation to transfer your funds. Your details can also be used in other scams. 

4. Advice scams

Similar to review scams, advice scams lure you in by promising free pension advice. Again, the aim is to get you to give the criminals authorisation over your pension or to use your information in other scams. 

What tactics do pension scammers use?

Pension scams are clever. Rather than using fake emails or badly worded text messages, these scammers go to great lengths to come across as genuine companies.

More often than not, the fraudsters will have professional looking websites or cultivate other convincing online elements, like social media. Phoney websites may sound elaborate, but when you consider the money up for grabs, for the criminals, it’s a worthwhile investment. 

If you’re in any doubt about whether a company is genuine, the Pensions Advisory Service has an online tool that can help you identify a scam. The tell-tale signs typically include:

  • Calls, texts and emails or even in-person visits that you have not asked for. It’s worth knowing that since 2019, cold calling about pensions has been banned. This means it’s unlikely anyone legitimate would look for business this way.
  • Promising to help you release your funds before you’re 55. While you can do this in some circumstances, releasing your pension early generally means you’ll have to pay 55% tax on the money withdrawn.
  • High rates of return on investments. The average investment return hovers around the 5% mark (after inflation). So, if you’re being told investments can earn you significantly more than this, it could be a scam.


How can I prevent a pension scam?

You can protect yourself and your pension by:

  • Ignoring unsolicited advice or offers of advice that you receive
  • Taking time to review any changes to your pension – you shouldn’t be rushed or pressured into a decision
  • Checking the firm or individual giving you advice is qualified to do so. You can check the FCA register for legitimate, regulated firms
  • Seeking impartial advice

What should I do if I’m a victim of a pension scam?

You should contact your pension provider in the first instance. If the scam has just taken place, your provider may be able to stop the transfer of funds before they leave your account.

The next step is to notify Action Fraud and report the scam.

Can I get my pension fund back?

Sadly, it’s almost impossible to get your money back once a transfer is made. 

You may be able to seek compensation through the Financial Services Compensation Scheme (FSCS) but this would only apply in certain situations. The FSCS usually only offers compensation in cases of negligent advice or where schemes have failed, rather than an outright scam.  

The best protection is prevention. Always look for impartial advice from a regulated firm and be wary of anyone offering you unsolicited guidance. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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