Fraudsters promise high returns and low risk, but in reality, pension savers that are scammed can be left with nothing. When savers realise they’ve been scammed, it can be devastating – many lose their life savings. Once the money is gone, it’s almost impossible to get it back.
How pension scams work
Anyone can be the victim of a pension scam, no matter how savvy they think they are. It’s important that everyone can spot the warning signs. Scammers try to persuade pension savers to transfer their entire pension savings, or to release funds from it, by making attractive-sounding promises they have no intention of keeping.
The pension money is often invested in unusual, high risk investments like:
- Overseas property and hotels
- Renewable energy bonds
- Forestry
- Parking
- Storage units
Or it can be simply stolen outright
Many scammers persuade savers to transfer their money into single member occupational schemes, or other occupational pension schemes. Savers could lose all their money and face a high tax bill from HM Revenue and Customs (HMRC) if they withdraw their pension savings before the age of 55.
Warning signs of a pension scam
Scammer’s often cold call people via phone, email or text – this is illegal, and a likely sign of a scam. They often advertise online and can have websites that look official or government-backed.
Other common signs of pension scams:
- Phrases like ‘free pension review’, ‘pension liberation’, ‘loan’, ‘loophole’, ‘savings advance’, ‘one-off investment’, ‘cashback’
- Higher returns – guarantees they can get better returns on pension savings
- Help to release cash from a pension before the age of 55, with no mention of the HMRC tax bill that can arise
- High pressure sales tactics – time limited offers to get the best deal; using couriers to send documents, who wait until they’re signed
- Unusual high risk investments, which tend to be overseas, unregulated, with no consumer protections
- Complicated investment structures
- Long-term pension investments – which often mean people who transfer in do not realise something is wrong for a number of years
Always check a firms authorisation on the FCA register at https://register.fca.org.uk/ and only ever use an authorised Independent Adviser and where possible obtain a recommendation from a family member or friend of a suitable Advisory Firm to approach for advice.