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How to spot and avoid pension scams

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Pension scams come in lots of shapes and sizes, but they all have the same effect – you lose your life savings. On average, victims of pension scams lost over £50,000 each, according to a 2021 report by Action Fraud. Don’t let others enjoy your retirement - here’s how to spot and avoid pension scams, as well as what you can do if you think you've been a victim.

Spotting a pension scam

Pension fraudsters use a lot of different ways to try and get a hold of your money.

Cold calling, text messages, emails, or visits in person

A fraudster will often get in touch with you out of the blue. This is because they’ll be trying their luck with whatever information they have managed to gather on you, to try and convince you to part with all or some of your pension savings.

If someone gets in touch about your pension and you didn’t ask to be contacted, it’s the biggest red flag to stop communicating and don't take them up on their offers.

A firm doesn’t allow you to call it back

A quick way to check if a caller is from a genuine company or not is to ask them if you can call them back later. If they say you can't call them, it's likely a fraudster. Regulated pension advisers will always let you get in touch at a more convenient time and to talk through any questions you might have.

Poor contact details

Sometimes fraudsters will give you details for calling them back, but that doesn't mean they're a genuine organisation. If the phone number is a mobile number, or the delivery address is a PO Box, the alarm bells should start ringing.

Your best bet is to look up the company on the FCA register without any input from the potential fraudster. If they are on the register call them back using that number. If they're not on the register don't make further contact.

Promises to unlock your pension when you’re under 55

With this one, the rules are very simple. Most people who take out money from a pension before age 55 will have to pay 55% tax on the money taken out and a huge fee to the company that arranged it for you.

The only time you can get to your pension early is if you have a serious health problem or you have what's known as a 'protected retirement date' - and this had to be granted before April 2006.

Some fraudsters might refer to getting your pension early as 'pension liberation' & 'pension loans' or 'selling your pension'. It all means the same thing and you'll have to pay a huge tax bill if you do it.

You’re told to make quick decisions

The hard sell is a technique used in many types of fraud, and it’s no different with pensions. You might be pressured into making decisions about your money, asked to transfer large sums over the phone or send paperwork using fast delivery services.

Deciding what you do with your life savings and how you want your pension to be set up are big, life changing decisions. If someone is wanting you to move quickly, they're not thinking about what's best for you. Stay away.

Offers of high return, low risk schemes

You’ll hear this kind of promise in lots of other types of money fraud, and it's always a warning sign that something is not legitimate. If you’re being offered very high returns, there is always significant risk, but in this case, it’s just a hollow promise to get you to hand over lots of your savings.

Pension tax loopholes and tax savings

These are made up promises to get you to part with your money. Saving into a pension is already tax efficient, so any extra tax savings are not eligible for even more tax savings.

Claiming to be government-backed

You might see companies using certain words and phrases in their name or as part of their marketing spiel, with the effect of making them sound official, or even supported by government.

Some of the organisations they’ll try and associate themselves with might be Pension Wise, or MoneyHelper. No legitimate organisation will ever contact you directly out of the blue.

Watch out for tell-tale fraudster words

Companies that are trying to get at your pension money will often use a selection of words that sound impressive, but mean very little and are a sure sign that the offer is a fake. Here are some to watch out for:

  • pension liberation
  • pension loan 
  • loophole
  • free pension review
  • one-off investment.

Or an investment that’s described as:

  • unique
  • overseas
  • environmentally friendly
  • ethical
  • a ‘new’ industry.

How to avoid pensions scams

Once you know what to look for, there are a few steps you can take to help you avoid being scammed.

Do not take calls, reply to emails or texts, or talk to people knocking at your door who you’re not expecting.

Don’t try and get to your pension before you turn 55, unless you are seriously ill.

Consider promises of high returns and tax breaks as sure-fire signs of fraudsters.

Do some research on any companies you’re considering working with to boost your pension. The first thing to do is to go to the FCA register to see if the company is regulated, and then go to the FCA’s warning list to see if the company has a previous history of dodgy dealings.

What can I do if I think I’ve been a victim of a pension scam

If you think you might have been targeted by a pension scammer, you should report it as soon as possible. There are things you can do to possibly reclaim your money or even stop others falling victim.

If the scam was recent, contact your pension provider. They may be able to interrupt the transfer and stop the fraudster from claiming your pension. You can also call the Financial Crimes and Scams Unit on 0800 015 4402 to see what other help is available.

Tell Action Fraud what happened on 0300 123 2040 or by reporting the scam on their website (Opens in a new window). It's important to do this, even if the scam was a long time ago.

MoneyHelper offer free Pension Loss and Rebuilding My Pension appointments with our specialists. Call us on 0800 015 4402 or email to book your session.

Once we know what happened to your pension, we can tell you whether you might be able to claim compensation. If you weren't scammed recently, it’s unlikely that you’ll get all your money back, but if you can claim something, it’s worth doing.

You can use a Rebuilding My Pension session to discuss with our specialists how you might be able to rebuild your pension funds, get the most out of your State Pension and see if any of your pensions can be improved. We'll also tell you how to trace old pensions you might have lost access to.

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