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What are the warning signs of a pension scam?

Your pension is one of the most valuable assets you have. But, like anything valuable, a pension can become the target for illegal activities, scams or inappropriate and high-risk investments.

Pension scams are on the increase in the UK, with fraudsters using progressively sophisticated methods to get savers to part with their money. Advances in technology and digital communications mean these kinds of scams are getting more difficult to identify too, and the outcome can be devastating. A lifetime’s savings can be lost in moments. It is therefore vital that you are able to spot the warning signs of a pension scam, so that this heartbreak can be avoided.

How pension scams work

A pension scam is when fraudulent companies or individuals try to persuade pension savers to transfer their entire pension savings, or to release funds from it, by making attractive sounding promises that they have no intention of keeping.

Using tempting offers and intimidating sales tactics, fraudsters persuade pension scheme members to transfer or invest their pension into suspicious, unregulated investment structures. According to the FCA and The Pension’s Regulator, pension scam victims lose a staggering £91,000 on average.

The pension money is often invested in high-risk investments like:

  • Overseas property and hotels
  • Renewable energy bonds
  • Forestry
  • Parking
  • Storage units

Or it can be simply stolen outright. With scam tactics continuously evolving, anyone can be the victim of a pension scam, no matter how savvy they think they are. It’s therefore important for everyone to be aware of the warning signs.

Warning signs of a pension scam

Scammers often cold call victims via phone, email, text or even at the front door and offer a guarantee of better returns on pension saving; this is illegal and will almost always be a scam. They also often advertise online using misleading websites that may appear authentic or government-backed; but these can be cloned from legitimate organisations; even if they look official, remember that appearances can be deceiving.

Fraudsters also use high-pressure sales tactics like time limited offers to get the best deal. Some even use couriers to send documents, who then wait and put pressure on you until the documents are signed.

If you’re ever feeling in doubt, you can check whether the firm that the suspected scammer represents is registered by searching on the FCA website. This tool also lets you see if the firm the adviser represents is authorised to give advice specifically on pensions.

Other warning signs to look out for:
  • Recommendations of transferring your money into a single overseas investment, with returns of 8% or higher
  • Claims of knowing about loopholes that can help you get more than the usual 25% of tax-free cash
  • Help to release cash from a pension before the age of 55 (unless you’re seriously unwell or have a certain type of scheme, this isn’t legally possible)
  • Unusual high-risk investments, which tend to be overseas, unregulated, and with no consumer protections
  • Complicated investment structures
  • Long-term pension investments – which often mean people who transfer in do not realise something is wrong for a number of years
  • Finally, claims that they are from a legitimate organisation like the Pension Service or Pension Wise
What to do if you think you’ve been or are being scammed

If you think you might have already been targeted and you’ve agreed to transfer your pension, take action fast:

  1. Contact your pension provider immediately – they may be able to stop the transfer if it has not already gone through.
  2. You should also contact Action Fraud on 0300 123 2040 and report the scam. 

Anyone can be the victim of a pension scam. If you have any concerns, please call the George Square team on 0115 947 5545 or send us a message here.

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