Pension Scams: How to Protect Your Savings

If an offer sounds too good to be true, it probably is. And there are a number of warning signs to look out for.

Ruth Jackson-Kirby Last updated on 16 February 2021.
Pension Scams: How to Protect Your Savings

When the government gave over-55s greater access to their pension pots back in 2015, they also unleashed a new way for criminals to line their pockets – pension scams. With the average victim losing a whopping £82,000, according to the Financial Conduct Authority, it is important that you understand how these scams work and how to protect yourself and your savings.

What is a pension scam?

Thanks to the pension reforms in 2015, savers now have full access to their pensions from the age of 55. This means millions have the option to cash in their pensions and get their hands on tens of thousands, if not hundreds of thousands, of pounds. Unsurprisingly, this has attracted the attention of fraudsters, and numerous pension scams have sprung up all with the same aim – to steal people's retirement savings.

In essence, a pension scam is a trick to get you to access your pension and hand some or all of it over. This could be by getting you to transfer your money to a fictional investment so conmen can walk away with the cash, or it could be a real investment scheme with sky-high fees that the criminals take. These could include investments in overseas hotels, luxury products, storage and car parking, or they may goad you in with niche environmental projects.

One thing all pension scams have in common is a need for you to transfer your pension away from where it is currently held. The incentive to do this could be:

  • To access your pension before you are 55.
  • To access more of your pension tax-free than the law allows.
  • To get a far higher return on your investments.

Common pension scams

Most pension scams begin with a free pension review. We all love getting something for nothing, so criminals know a free pension review is a great way to bait the hook.

From there you may be advised that a number of schemes would benefit you. It might be described as a pension loan, pension liberation or early pension release, but they are all scams.

Pension scammers aren’t stupid, and they are constantly coming up with new ways to separate you from your pension. That means it’s impossible to describe every possible pension scam. Nonetheless, there are plenty of warning signs.

How to spot a pension scam

The details may vary from one pension scam to the next, but there are common things that should get your guard up:

  • Cold calling: Since 2019 it has been illegal for a company to call you out of the blue about your pension. Any calls like this should set your alarm bells ringing. Hang up. (Learn about more phone scams.)
  • Emails: Random emails about your pension should also be treated with suspicion.
  • Loopholes: Anyone claiming to know about a loophole in the law that allows you to access your pension early or take more than the legal 25% tax-free is likely to be a conman.
  • Bumper returns: Tempted by a promised return of 8% or more from an overseas investment or little-known scheme? If it sounds too good to be true, it usually is.
  • One investment: Spreading your pension money across numerous investments is a sensible way to reduce risk. Treat any advice to put all of your money into just a single investment with extreme caution.
  • Time-limited offers: Always be on your guard if you are put under pressure to make a quick decision. This is a key tool of fraudsters, as we are all more likely to make mistakes when we are rushing. This can also include offers to courier your paperwork for an immediate signature. Take your time and discuss any pension decisions with a trusted friend or family member.
  • Early access: There are very few circumstances when you can access your pension early. These are generally limited to certain pension schemes or if you are seriously ill. If you don’t meet these criteria, you will have to hand up to 55% of what you access over to the taxman, plus fees to your pension scheme.

These are all warning signs of a pension scam — keep an eye out for them. You can find out more about pension scams and how to protect yourself at the FCA’s ScamSmart website.

» MORE: Where to find real pension advice

How to check whether a pension opportunity is a scam

If you aren’t sure whether or not you are being scammed, there are a number of ways you can check.

Look to see if the person or company is on the Financial Services Register, or call the Financial Conduct Authority on 0800 111 6768 to check. If they are on the register, call them back using the telephone number listed to make sure you are talking to the genuine person or company.

You can also speak to the Pension Advisory Service by calling 0800 011 3797 to discuss your pension and get their advice.

What to do if you’ve experienced a pension scam

If you think you have been the victim of a pension scam, call your pension provider immediately. They may be able to stop the transfer.

Report the crime to Action Fraud by calling 0300 123 2040 or online.

Source: Getty Images

About the author:

Ruth is a freelance journalist with 15 years of experience writing for national newspapers, magazines and websites. Specialising in savings, investments, pensions and property. Read more

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