How To Spot Pension Scams and How To Avoid Them

Pension scams are becoming more and more common in the UK, with criminals finding new ways to target people's retirement savings.

When it comes to pension scams, anyone can be a victim - no matter how financially savvy they are. These types of scams usually involve someone persuading you to cash-in your pension and hand over your pot of monies to be invested. Unfortunately, these schemes are very lucrative for criminals, with victims losing an average of £50,000 according to Action Fraud data from 2021. With an estimated £2.5tn of pension wealth across the UK, it's not a surprise that fraudsters want to access your pension funds - this is a major problem.

In this blog post, we'll take a look at how pension scams work and what you can do to protect yourself from them.

What are the most common pensions scams?

Pension scams usually involve someone persuading you to cash-in your pension and hand over your money to be invested. This could happen in a number of ways, such as through cold-calling, social media posts or even face-to-face meetings.

Scammers will try to persuade you to transfer your entire pension savings, or at least a portion of it, by making appealing promises of high returns and excellent investment alternatives that are rarely genuine. These schemes will try to swindle you and your funds, by placing them in high-risk overseas investments like overseas property, renewable energy bonds, forest plantations, storage units and parking.

Pension scams are becoming more prevalent in the UK as pension freedom rules allow people to access their pension pot at age 55. Scammers promise early access to pensions through loans and loopholes, often with high fees, and may invest whatever is left into high-risk schemes. It is important to be aware of these scams and be aware of the only instances where you can legally access your pension before age 55. These include if you are in poor health or if you work in an occupation that has a traditional early retirement age, such as athletes. Knowing how these scams work can help protect your hard-earned savings.

Some pension plans and providers are set up to deceive victims by either not existing at all or impersonating a credible pension provider. Scammers might assure potential victims of greater returns on their retirement funds, usually utilizing high-pressure sales tactics such as limited time offers or delivery through couriers who wait around until the victim signs them.

Another popular scam is called 'emotional blackmail', where fraudsters contact victims claiming to be from HMRC or another government department, saying that their pension pot has been frozen due to an error. They then offer to help release the funds for a fee.

They may also contact you to offer free pension reviews, new pension opportunity, personal pension scheme, pension loans, pension liberation, money advice service and many more. Usually they are offering high risk investments.

Many of these investments are not authorised by the FCA. This means that if something goes wrong, you will have little or no recourse to get your money back. Is this new pension opportunity really worth the risk?

Of course, these types of promises are usually too good to be true and the reality is that you're likely to lose all your money if you fall for one of these scams. In most cases, the fraudsters will disappear with your money and leave you with nothing.

How can you protect yourself from a pension scam?

It's important to be aware of the warning signs that might indicate a scam. For example, if someone offers you an investment with guaranteed high returns or tells you that you can access your pension early, then this should set off alarm bells.

It's also important to remember that you should never give out your personal or financial details to anyone unless you're absolutely sure who they are. If someone calls you out of the blue and asks for your bank account details, then this is a huge red flag. Remember never to click on any suspicious links in an email or message, never to give out your personal details, ID, address, card numbers, passwords etc.

If you're ever unsure about an investment opportunity, then it's always best to speak to your financial advisers or your existing pension provider before making any decisions. They'll be able to tell you whether the offer is legitimate or not.

If you're thinking about using the services of an individual or company to help with your pension, it's important to check that they're authorised by the Financial Conduct Authority (FCA). You can use the FCA register (https://register.fca.org.uk/s/) to check this. Trust only a regulated financial adviser - and don't be afraid to verify him or her during the phone call. It pays to be pension wise.

It's also worth calling the consumer helpline on 0800 111 6768 to check whether the firm is permitted to give pension advice. You can check the warning list under this address https://www.fca.org.uk/scamsmart/warning-list.

Finally, if you think you may have been the victim of a pension scam, then you should report it to Action Fraud on 0300 123 2040 as soon as possible. If you get an unsolicited phone call and are unsure whether you can trust this number, visit who-called.co.uk to find out how other people rated their experience with this unknown number.

How do I spot a pension scammers?

Pension scams can be difficult to spot because the scammers will often use high-pressure sales tactics and try to rush you into making a decision. They are financially knowledgeable, so they are hard to unmask. They may also send documents via courier in an attempt to get you to sign them without giving you time to fully read and understand what you're agreeing to. If you're ever contacted out of the blue about your pension, be very careful about any decisions you make and always consult with a financial advisor before taking any steps.

These scammers are often very convincing, but there are a few key things to look for when you suspect someone might be trying to scam you out of your pension.

First, be wary of anyone who cold calls you or comes to your door unsolicited and tries to sell you an investment opportunity. Secondly, be on the lookout for promises of unrealistic returns or pressure to make a decision quickly without doing your own research. Finally, don't hesitate to ask questions and get second opinions. Transferring your pension savings is a serious matter, and far too many vulnerable people fall victim to a pension scam every day.

Your awareness of the fact that such situations occur is paramount. Be vigilant and don't trust random people. Inform your friends about the danger and spread the word among your neighbours and family. By doing so, fraudsters can be stopped.