Five sure-fire ways to spot a pension scam

7th September 2018

Did you know the average pension scam victim loses £91,000? Be sure you’re aware of these five sure-fire ways to spot a fraudster and protect your life’s savings.

Pension scams are a subject we have written about a lot, but with your financial future on the line, it’s one we make no apology about returning to. A new campaign from the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) is demonstrating just how devastating the crime can be for those planning their retirement years.

The latest figures from the FCA show that the average pension scam victim loses £91,000, a significant sum that can mean you have to rebuild your life’s savings just when you should be starting to enjoy them. While the number of pension scams reported to Action Fraud in 2017 totalled 253, it’s thought that many crimes of this kind go unreported. The FCA’s Lives report indicated that 107,000 people aged between 55 and 64 could have potentially been victims of pensions scams during 2017 alone.

The new research found that those aged between 45 and 65 are the most vulnerable to pension scams. Some 12% of people in this age bracket would trust an offer of a ‘free pension review’ from someone claiming to be a pension adviser. The claim of a ‘free pension review’ is one of the most common types of investment and pension scams. According to the FCA, the seven most searched for investment and pensions scams are:

  1. Cryptocurrency
  2. Binary options
  3. Foreign exchange
  5. Bonds
  6. Pension Review
  7. Pension loan/liberation

If you’re concerned about the security of your pension and potential scams in light of the FCA and TPR’s campaign, there are five sure-fire signs that the person you are communicating with is a fraudster.

1. Unsolicited contact

Unsolicited contact is the clearest indication that the person you are speaking to could be a fraudster. Whether communication is established via phone, post, or email, you should never make financial decisions based on unsolicited contact.

While it may seem like a clear sign of a scam, it is one that many victims have missed and handed over their details as a result. The FCA research found that 32% of pension holders between the ages of 45 and 65 would not know how to check if they are speaking to a legitimate pensions adviser or provider. A quick search on the Financial Services Register can help you verify the details you are being given, including phone numbers so you can contact them directly.

2. Pushy or threatening behaviour

Fraudsters will be working on a timescale and will typically use pushy or threatening behaviour as a result. If you feel that communication with a pensions adviser is not professional or they want to get a transaction completed as fast as possible, it is best to take a step back. Pension scammers will often offer time-limited offers or inform you they’re sending a courier round with paperwork to sign.

Real companies and genuine finance professionals will let you take your time, recognising how important pension decisions are, and be open to answering your questions. If you feel uncomfortable at any point during the process, ask yourself if their behaviour is representative of a professional that has your best interests at heart.

3. Promising high guaranteed returns

We all want to get the most out of our pensions as possible, so when someone posing as a financial adviser proposes a way to make guaranteed high returns, it is tempting. Fraudsters will often state that there is no risk at all, downplay the associated risks, or avoid your questions on the topic. All investments come with a layer of risk and the higher the potential return, the greater the risk.

The old adage, ‘If it sounds too good to be true, it probably is’ certainly rings true when it comes to pensions. The simple fact is that if there was a way to guarantee high returns from a pension, it is a step that everyone would be taking.

4. Avoiding attempts to verify authority

A genuine pension provider or financial adviser will be happy to give you their details and allow you to verify their authority. A scammer, on the other hand, will offer scarce contact details, will not allow you to ring back on a verified number, or try to gather all your details during the first time you communicate.

As mentioned in an above point, it is simple to verify who you’re speaking to by using the FCA’s Financial Services Register. It is a step that could protect your pension and retirement plans if you are targeted by criminals.

5. Claims to unlock your pension

The option of an early retirement certainly sounds appealing, so if you receive a call informing you that your pension could be unlocked before you turn 55, it is understandable that you would be intrigued. However, the truth is that in the vast majority of cases it is not possible to unlock your pension savings until you turn 55 without facing substantial charges and a tax bill. There are a few instances where it is possible, such as if you’re diagnosed with a terminal illness, but in these cases, you can contact your pension provider directly.

The latest campaign from the FCA and TPR highlights just how common pension scams are. While an ‘it will never happen to me’ mindset is common, the reality is very different.

Dimitrios Tsivrikis, Consumer and Business Psychologist, said: “Scammers are intelligent, ambitious and deceiving. They mimic the sales patter used by salesmen, building trust, a rapport and a relationship to infiltrate our psyches and influence our behaviour. That’s why I want everyone to remember that if it sounds too good to be true, then it probably is. So, put the phone down to unsolicited calls regarding your pension and stop a scammer from stealing your retirement.”

If you’re concerned about pension advice or communications you’ve received from an unknown party, you can get in touch with us before making any decisions. Follow your financial plan, get a second opinion and remember to be mindful of deals that sound too good to be true.