Think you’re too smart to get scammed? Anyone could fall victim to a pension scam – and according to Action Fraud this includes two people who lost pots worth more than £1,000,000 each.
In 2017, victims lost an average of £91,000 each to pensions scammers. As it’s believed that the majority of people who get scammed avoid contacting the authorities, the numbers could actually be higher.
Research by the Financial Conduct Authority reveals that a large proportion of pension holders think that they’re too savvy to be scammed, but as scammers’ methods and technology become increasingly sophisticated, this really isn’t the case.
Nicola Parish, The Pensions Regulator’s (TPR) Executive Director of Frontline Regulation, said:
“Victims of scams are often traumatised by what has happened to them and many inevitably are left questioning how they are going to afford to retire […] However large your pension pot, you must be vigilant and able to spot and avoid a scam.”
How to spot a scam
Pension cold calls were recently banned in the UK, but if you receive any sort of communication about your pension out of the blue you should still be wary.
Scam victims reported calls that offered them free pension reviews and promised high rates of returns – the basic rule is to get off the phone to double check who you’re talking to, and make sure it’s a legitimate company.
Don’t be afraid to hang up, research who you were talking to, make sure the number or email matches up and contact them through official channels if you want to. You can visit the FCA’s ScamSmart hub to check if you’re talking to a known scammer, or if someone is using similar methods that might mean they’re running a new scam.
Here are some more signs that someone could be out to scam you:
They might push you into making a quick decision.
No legitimate pensions adviser will encourage you to do anything rash with your life savings. If you say you need more time to decide whether what they’re proposing is something you’re willing to do, they should accept that.
They’ll mention pension tax loopholes
You’re already being tax efficient by paying into your existing pension, there aren’t any additional tax savings any new scheme would be able to get you.
They could mislead you about unlocking your pension pot before you’re 55
Most people who release their pension before age 55 will not only have to pay the company who arranged it a substantial fee, but they’ll also be taxed 55% on the money they receive. Although accessing your pension early is possible, some pension scammers may fail to mention the pitfalls.
You can only access your full pension before you’re 55 without the tax penalty if you have a serious health problem or you’ve got a ‘protected retirement date’ – which had to be granted before April 2006.
Scammers might use terms like ‘pension loans’, ‘selling your pension’ or ‘pension liberation’ and these all refer to this method of expensive early pension release. Try to steer clear of anyone who mentions any of these.
Watch out for “low risk, high return”
Part of the scammers’ sales pitch might include pushing you towards investments that seem too good to be true.
They could also offer investments described as:
• environmentally friendly
• ‘new’ industry
They claim to be government backed
Watch out if anyone is claiming that their product is associated with organisations like Pension Wise, the Pensions Advisory Service or the Money Advice Service. None of these organisations would ever contact you directly, especially not to sell you something.
Don’t keep quiet
If someone has attempted to scam you out of your pensions savings, or even successfully scammed you, it’s important you share your experience.
Telling Action Fraud the details could help someone else avoid being scammed in the future, there’s no need to be embarrassed.
Report any scam attempt to ScamSmart or Action Fraud online or by calling 0300 12302040.