How to spot a pension scam

Pension scams are on the increase in the UK. Every day fraudsters are using sophisticated ways to part savers from their money. A lifetime’s savings can be lost in moments

Read this guide to find out how to spot pension scams.

What is a pension scam?

There are different types of pension scam but they can all lead to you losing a lifetime’s worth of savings in a moment.

Since April 2015 you have more choices about how you can access your pension pot than in the past. Be on high alert.

Scammers know this and and will try to lure you with promises of upfront cash and one-off ‘deals’ with guaranteed high returns.

They might try to persuade you to cash in your pension – either the whole lot or a large sum – and hand the money to them to invest.

Watch out particularly for people contacting you out of the blue or adverts claiming to offer free pension reviews or no-obligation consultations.

Unscrupulous firms or individuals might also:

  • Say they can help you or someone else unlock your pension before age 55 (sometimes known as ‘pension liberation’ or ‘pension loans’. If you are under 55 you normally can’t legally access the money in your pension scheme. Only in very rare cases is this possible – such as if you’re in very poor health – so don’t believe them.
  • Encourage you to transfer your pension quickly and even send documents by courier.
  • Claim to know of loopholes that allow you to get more than the usual 25% tax-free cash.
  • Promise extra tax savings and/or very high returns from overseas investments or new or ‘creative’ investments.

If you take your pension savings early, it can result in tax charges of more than half of the value of the money you take out.

But those being targeted are usually not told about the potential tax implications.

This is in addition to high charges, typically 20% to 30% for entering into one of these arrangements as well as your remaining pension savings being placed into high-risk investments.

How to spot a pension scam

There are some common tell-tale signs that mean it could be a scam:

  • When a firm doesn’t want or allow you to call it back.
  • Being approached out of the blue over the phone, via text message , email or in person door-to-door.
  • Where you aren’t given long to make a decision or you feel pressured into making one immediately.
  • Where the only contact details they give you or are on their website are a mobile number and a PO box address.

Some outfits might be very sophisticated and have convincing websites.

Some might imply that they are part of the government-backed Pension Wise service by including ‘wise’, ‘guidance’ or ‘pension’ in their name.

Pension Wise offers impartial and free information and guidance on your pension options.

It will never contact you out of the blue to offer you a pension review and it has only one website:

We’ve even heard of some fraudsters saying they are from the Money Advice Service. Rest assured we will never contact you direct about this.

If you receive a call claiming to be from us – or the government – or other government-backed organisation put the phone down.

Once you’ve transferred your pension or handed over your pension savings, it’s too late. Many victims have lost their entire pension savings.

What to do if you think you’re being targeted

If you’ve already signed something you’re now unsure about, contact your pension provider straight away.

They might be able to stop a transfer that hasn’t taken place yet. Then call Action Fraud on 0300 123 2040 to report it.

If you have doubts about what to do, ask The Pensions Advisory Service (TPAS) for help. Call them on 0300 123 1047 or visit theTPAS website [link] for free pensions advice and information.

If you are 50 or over, you might be eligible for a Pension Wise guidance session. Visit the Pension Wise website to find out more.

  • If you do need professional help only use a financial advice firm that is regulated and authorised by Financial Conduct Authority (FCA). The easiest way of being sure is to choose a firm that is registered on the Money Advice Service Retirement Adviser Directory. All the firms on our Directory are registered and authorised to offer regulated advice on pension and retirement options. Although you will have to pay for the advice, if you use a regulated professional they take the liability for any recommendation they give you – so if they get it wrong – you are covered by the Financial Ombudsman Service and the Financial Services Compensation Scheme.
  • Never be rushed into making a decision. It is important to check the facts before you make any irreversible decision. Remember you could lose your lifetime’s savings.

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