How to spot a pension scam

Pension scams are on the increase in the UK. ‘Free pension reviews’, ‘one-off pension investments’, ‘pension loans’ or upfront cash offers are being used to part savers from their money. 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. Fraudsters are likely to take advantage of these new rules by trying to persuade people to cash in their 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 may also:

  • promise extra tax savings and/or very high returns from overseas investments or new or ‘creative’ investments
  • claim to know of loopholes that allow you to get more than the usual 25% tax-free cash
  • say they can help you or someone else unlock your pension before age 55
  • encourage you to transfer your pension quickly and even send documents by courier

If you are under 55 you normally can’t legally access the money in your pension scheme. There are only rare cases where it’s possible to do this, such as if you’re in very poor health.

Pension scams where companies claim to help you take your pension savings early are known as ‘pension liberation fraud’ or ‘pension loans’. 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. 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:

  • being approached out of the blue over the phone, via text message 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
  • when a firm doesn’t want or allow you to call it back

Some outfits may be very sophisticated and have convincing websites. Some may 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: pensionwise.gov.uk

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 - 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. Even if you don’t lose your money, you could still end up with a large tax bill.

What to do if you think you’re being targeted

  • Never be rushed into making a decision. Before you sign anything, contact the Pensions Advisory Service (TPAS) on 0300 123 1047.
  • Make sure the firm is registered with the Financial Conduct Authority (FCA) to conduct business before you agree to anything. Use the FCA’s online firm check or call 0800 111 6768.
  • Look at the FCA’s website for information on avoiding scams and unauthorised firms.
  • If you have accepted an offer of think you’ve detected a scam, raise the alarm by calling Action Fraud on 0300 123 2040 or go to actionfraud.police.uk.

It is important to check the facts before you make any irreversible decision. Remember you could lose your lifetime’s savings. For examples of real life scams, read this leaflet (PDF 1MB).