How to Spot and Avoid Pension Scams

​Pension scams come in lots of shapes and sizes, but they all have the same effect – you lose your life savings. Victims of pension scams on average lost £91,000 each, according to the Financial Conduct Authority (FCA). Don’t let others enjoy your retirement – here’s how to spot and avoid pension scams.

Pension fraudsters use a lot of different ways to try and get a hold of your money…

Cold calling, text messages, emails, or visits in person

A fraudster will often get in touch with you out of the blue. This is because they’ll be trying their luck with whatever information they have managed to gather on you, to try and convince you to part with all or some of their pension savings.

If someone gets in touch about your pension and you didn’t ask to be contacted, it’s the biggest red flag to stop communicating and don’t take them up on their offers.

Pension cold calling was made illegal last week so if anyone calls you out of the blue about your pension, just hang up.

A firm doesn’t allow you to call it back

A quick way to check if a caller is from a genuine company or not is to ask them if you can call them back later. If they say you can’t call them, it’s likely a fraudster. Regulated pension advisors will always let you get in touch at a more convenient time and to talk through any questions you might have.

Poor contact details

Sometimes fraudsters will give you details for calling them back, but that doesn’t mean they’re a genuine organisation. If the phone number is a mobile number, or the delivery address is a PO Box, the alarm bells should start ringing.

Your best bet is to look up the company on the FCA register without any input from the potential fraudster. If they are on the register call them back using that number. If they’re not on the register don’t make further contact.

Promises to unlock your pension when you’re under 55

With this one, the rules are very simple. Most people who take out money from a pension before age 55 will have to pay 55% tax on the money taken out and a huge fee to the company that arranged it for you.

The only time you can get to your pension early is if you have a serious health problem or you have what’s known as a ‘protected retirement date’ – and this had to be granted before April 2006.

Some fraudsters might refer to getting your pension early as ‘pension liberation’, ‘pension loans’ or ‘selling your pension’. It all means the same thing and you’ll have to pay a huge tax bill if you do it.

You’re told to make quick decisions

The hard sell is a technique used in many types of fraud, and it’s no different with pensions. You might be pressured into making decisions about your money, asked to transfer large sums over the phone or send paperwork using fast delivery services.

Deciding what you do with your life savings and how you want your pension to be set up are big, life-changing decisions. If someone is wanting you to move quickly, they’re not thinking about what’s best for you. Stay away.

Offers of high return, low-risk schemes

You’ll hear this kind of promise in lots of other types of money fraud, and it’s always a warning sign that something is not legitimate. If you’re being offered very high returns, there is always significant risk, but in this case, it’s just a hollow promise to get you to hand over lots of your savings.

Pension tax loopholes and tax savings

These are made up promises to get you to part with your money. Saving into a pension is already tax efficient, so any extra tax savings are not eligible for even more tax savings.

Claiming to be government-backed

You might see companies using certain words and phrases in their name or as part of their marketing spiel, with the effect of making them sound official, or even supported by government.

Some of the organisations they’ll try and associate themselves with might be Pension Wise, the Pensions Advisory Service, or the Money Advice Service. None of these organisations will ever contact you directly.

Watch out for tell-tale fraudster words

Companies that are trying to get at your pension money will often use a selection of words that sound impressive, but mean very little and are a sure sign that the offer is a fake. Here are some to watch out for:

• pension liberation
• pension loan
• loophole

Or an investment that’s described as:

• unique
• overseas
• environmentally friendly
• ‘new’ industry

How to avoid pensions scams

Once you know what to look for, there are a few steps you can take to help you avoid being scammed.

• Do not take calls, reply to emails or texts, or talk to people knocking at your door who you’re not expecting.
• Don’t try and get to your pension before you turn 55, unless you are seriously ill.
• Consider promises of high returns and tax breaks as sure-fire signs of fraudsters.
• Do some research on any companies you’re considering working with to boost your pension. The first thing to do is to go to the FCA register to see if the company is regulated, and then go to the FCA’s warning list to see if the company has a previous history of dodgy dealings.

If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.