Six ways to avoid a pension scam

11th September 2017
six ways to avoid a pension scam

Crime doesn’t pay, but that certainly doesn’t stop people from trying. Crime doesn’t pay, but that certainly doesn’t stop people from trying.

New research from Retirement Advantage reveals that 18% of over 50s in the UK have been targeted by potential scammers in the past three months.

This equates to 1.8 million people who have been contacted by phone, text or email and offered:

  • Unsolicited pension advice
  • Investment opportunities

Why target over 50s?

Dealing with finances can be complicated for anybody, but especially so for those approaching retirement age. Since the Pension Freedoms were introduced in 2015, there are many more options available to savers, and research suggests that many over 50s are unaware and unprepared how best to utilise their pension pot.

For a scammer, this is a perfect storm, and this uncertainty of what can be done with a pension is often exploited.

Andrew Tully, Pensions Technical Director at Retirement Advantage, commented: “The pension freedoms have opened the floodgates for scammers and conmen to prey on people who are keen to access their pensions. These scammers are using increasingly sophisticated and convincing ways of trying to defraud large amounts of cash from people’s hard-earned pensions and savings. Attempts by the industry and regulators to prevent scams is not preventing huge sums of money disappearing into the scammers pockets. My concern is the reported fraud and scams is only the tip of the iceberg as many people are unaware they’ve been conned or are too ashamed to come forward and report it.”

How do I avoid being scammed?

It isn’t always easy to spot a crook, and many a wise person has been hoodwinked. Learning what to look for can keep you safe, but maintaining that vigilance is the best way to prevent your savings from falling into the wrong hands. Remember the old adage; if it sounds too good to be true…

Key things to be alert for include:

1. Anybody offering to help you access your pension before you are 55

This can only be done in very specific circumstances; usually when you are in extremely ill health. If you are suffering from health problems and you are eligible to access your pension then you should contact your pension provider directly first. Never take somebody else’s word for it.

Anybody promising early access if you aren’t ill could potentially be a scammer, so it pays to be aware of what is and isn’t possible with accessing your pension.

2. A suggestion to withdraw your entire pension pot and invest it

The Pension Freedoms allow you to take 25% of your pension pot tax-free, but any more taken out will be liable for taxation if it’s over your Personal Allowance.

Therefore, it only makes sense to only take out what you need.

Many people choose to invest their pension pots, but there are a number of warning signs to look out for:

  • Guaranteed returns (no investment is guaranteed. It would be nice if it were, but this is the most obvious sign of a scam)
  • Promises of abnormally high returns (often in the double digits)
  • Exotic investments (things like storage pods, overseas properties and burial plots)

The FCA website allows you to research the most common investment scams by using its ScamSmart tool, accessible here .

3. Pressure that the deal is limited and you must act immediately

Choosing the right retirement product for you is a huge decision, and often takes time to weigh up. It’s a decision that you will have to live with for the length of your retirement, so rushing into it without learning all the facts is dangerous to say the least.

Scammers will often try and take advantage of your initial interest by persuading you to sign up quickly, or offering a limited ‘window of opportunity’. Be wary of high pressure tactics, which may even include offering to send couriers to your house with paperwork.

4. Being discouraged from taking professional advice

If anyone tries to persuade you not to take professional advice, or talk to Pension Wise or The Pensions Advisory Service (TPAS), you should be suspicious. There will always be a cost associated with taking high quality, sound financial advice, but it will save you far more than falling foul of a scammer. Scammers may give many reasons not to take advice, such as:

  • The cost
  • You can do it yourself
  • The ‘deal’ might end before you’ve spoken to an adviser

All of these reasons are attempts to prevent a professional adviser from pointing the scammer out and steering you well clear.

5. Being contacted by somebody not on the Financial Conduct Authority (FCA) register

This register is a record available to the public that shows the regulated firms and individuals in the financial services industry. Anybody who isn’t on this register and purports to be a financial advisor isn’t regulated by the FCA, and should be viewed as a potential scammer. Checking the FCA register is simple and easy to do, and can be viewed here.

6. Trust a professional

Whilst it may sound like nobody can be trusted, any reputable adviser that is regulated by the FCA will be able to keep you out of harm’s way.

For more information about Pension Freedoms and how they can affect you, or if you are worried about a potential scam, don’t hesitate to contact us on the number at the top of the page.