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Spotting pension scams

Lured by the easier access savers have to their pension pots, pension scams are on the rise – here’s how to spot and hopefully avoid them. 

There are serious concerns that the number of pension scams will increase now the new freedoms allow pensioners to withdraw all of their pots in one lump sum.

While pension scams are not a new phenomenon, The Pensions Regulator is concerned the ability to increased freedom to pension pots from age 55 will be seen as too great a bonanza for operators of scams to resist.

According to figures from the City of London police, pensions fraudsters conned £8.6m out of unsuspecting savers in March 2017 alone, taking the total of pension fraud losses to more than £42m since April 2014. 

Meanwhile, the financial regulator the Financial Conduct Authority (FCA) says that by the end of 2016, a fifth (22%) of over 55s and a third (32%) of over 75s believe they had been targeted by an investment scam in the last three years.

Worryingly, the FCA found more than half (55%) of those who have invested in financial products did so on their own, rather than making the decision with family. One in seven (14%) over 55s spend little or no time researching financial investment products before handing over money, rising to a quarter (26%) of over 75’s.

What a scam looks like

While scams are increasingly sophisticated, there are some hallmarks that you should be on the lookout for. These include:

  • Cold calls about pension savings – this could be by phone, text, email or a personal visit
  • Offers to help you access your pension savings before the age of 55 
  • Encouraging you to invest large sums, potentially your whole pension pot
  • Trying to rush you into making a decision 
  • Talking about ‘loans’ or ‘loopholes’, or offering ‘unique’, ‘overseas’, or ‘new’ investment opportunities. 

An archetypal pension scam might therefore be an unsolicited call offering to help you get your hands on your pension savings thanks to a loophole, with opportunities to generate high returns from a sophisticated, overseas investment in a new asset class – but you should hurry, because the opportunity won’t be around for long. 

But even if you were to ignore all these warning signs, there is a further layer of protection to prevent a scam. 

If you choose to transfer out of a defined contribution (DC) pension scheme, your provider must carry out due diligence about the new scheme before allowing you to leave. Scheme trustees can refuse to allow a transfer if they don’t believe the transaction would be in your best interests.

To raise awareness of the potential pitfalls of unscrupulous operators, The Pensions Regulator runs its own awareness programme along with various other government agencies, with a website containing further useful information about spotting and avoiding scams.

Where to turn for help

There is a broad range of different services available via Pension Wise, which can arrange guidance to be provided over the phone by The Pensions Advisory Service, or face-to-face by the Citizens Advice Bureau.

But if you require advice specific to your own circumstances, then you should be referred to an FCA-regulated financial adviser by your scheme trustee or provider.

If you do decide to transfer outside of your current provider, always remember the old adage – if something looks too good to be true, it probably is. And if you are being put under pressure, you should also be very suspicious.  

If you suspect you have been contacted by a bogus firm, document each email and/or call and retain all paperwork and don't indicate to the scammers you suspect anything. Then you need to report your suspicions to the FCA, the police and to Action Fraud who can investigate.

Retiresavvy is brought to you by Skipton Building Society. This article has been commissioned by retiresavvy and any opinions voiced are the author's own.


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