The government may be taking steps to nip scammers in the bud, but every year thousands of people are taken in. Scams are so pervasive that 10% of those over 55 think some form of pension scam has targeted them since 20151.
Pensions are likely to remain an appealing target for fraudsters. This is because the life savings of an individual can often run into thousands of pounds. You must protect yourself against these scammers to keep your pension savings safe.
Look out for these 4 warning signs:
Pension fund liberation scams
From 55, you can access the money in your pension. If you make a withdrawal any earlier, you’re likely to face a high tax bill unless you meet specific criteria. Pension scam the UK might be experiencing is that some fraudsters will try to convince you to take an early pension release and access your pension before 55. They may even offer you cash incentives or refer to it as a ‘saving advance’ or ‘pension loan’.
It may sound like a tempting offer, but you should steer clear of pension liberation because you’re probably being asked to transfer your funds into an unregulated scheme – and you could lose everything to fraud or bad investment.
But there’s more
Victims of this kind of fraud are often unaware of the tax bill that comes with an early withdrawal. If you’re younger than 55, the government will consider this an unauthorised payment, and you could end up paying 55% tax on the withdrawal. You’ll be liable for this amount even if you lose all your money in the scam – so your loses could be over 150% of your pension’s value.
Cold calling pension Frauds
These scams take place when you’re contacted out of the blue by a stranger. The person cold calling, you will try convincing you to move your pension fund to a different investment and may even offer a last-minute chance for you to invest in a special deal, such as property development.
Fraudsters will often urge you to make a fast decision, and sometimes documents may be couriered to you for an immediate signature.
Don’t be fooled:
These scams don’t only happen on the phone – they can happen at any point of contact, including post, email, text message and in person.
Department for Work and Pensions scams
Fraudsters may try to target you through the post, using a fake letter from a company you would usually trust – such as banks or government departments.
The scammers will usually ask you to supply updated baking details and personal information or advise you that they’ve updated their baking information and you should make payments to this new account.
In some incidences, letters have been sent purporting to be from the Department for Work and Pensions.
Scams targeting your annuity
You are able to use your pension to buy an annuity, a product that guarantees an income for life. Fraudsters will often target those interested in buying an annuity and attempt to convince them to buy an unsuitable product or inflate the price.
Scammers are likely to target vulnerable, older clients who are ill or whose memory is failing. They may also offer a cash incentive or bonus to encourage you to sign or say the special deal is only valid for one day.
Use these 6 tips to protect your pension from scammers
Fraudsters are becoming very sophisticated, and sometimes it’s hard to spot a scam. Do these 6 things to protect your savings.
Keep your details private
Irrespective of how you’re approached, don’t share your pension details with anyone you don’t know and trust. Stay on guard; even if the person has information about your pension, it could still be a scam. You should even be cautious with sharing too many details with people you know – especially details like passwords.
Don’t be tricked by jargon
Scammers often use industry terms and complex language to fool you. Look out for words like ‘cashback’, ‘saving advance’, ‘pension loan’ and ‘legal loopholes’ as these are often used to convince you to access your pension early. You should also be cautious of anyone offering you a ‘free pension review’ or who fails to mention withdrawal fees on your pension.
Does it sound too good to be true?
It makes no difference whether you’re shopping for pension products or are approached out of the blue – avoid anyone who offers you a cash incentive or access to your pension tax-free. Avoid clicking on links offering you access to your pension without first checking out if the company is legitimate. And finally, always scan the small print for hidden fees. A good rule to use is that if it sounds too good to be true, it’s likely to be a scam.
Check with your pension provider
If you doubt something you’re being told about your pension, contact your pension provider to check if it’s true. Your service provider is the best resource on information relating to your pension, and they should also be informed if you’ve had unsolicited contact by someone who knows details about your fund.
Go to the Financial Conduct Authority register for confirmation
If you’re offered financial advice, you can use the register of the Financial Conduct Authority1 to confirm if they’re an authorised service provider. If they’re not registered, you should think twice about dealing with them. You could also check to the FCA’s warning list to see if the company is listed as a firm you should avoid.
Report PENSION FRAUDS
If someone has approached you about withdrawing your pension early, and it’s not a registered company, report it to the Financial Conduct Authority for investigation. The FCA has a consumer helpline on 0800 111 6768 on which you can report suspicious activity, or you can log it on their website.
If you’ve agreed to something but are having doubts, contact your pension provider immediately. If your savings have not been withdrawn from your account, they might be able to stop any pending transfers. Reach out to the Action Fraud hotline on 0300 123 2040 or visit the Action Fraud2 website.
Got Questions? Check These First
How can I report a pension scam?
If you’re worried a scammer has contacted you, immediately contact your pension provider. They can help prevent the transfer of your funds. Report the incident of pension fraud to Action Fraud on 0300 123 2040 or www.actionfraud.police.uk/report_fraud
How can I confirm if a pension provider is registered?
The register of the Financial Conduct Authority can confirm if a company is an authorised service provider. If the company is not registered, you should think twice about dealing with them. The FCA also has a warning list, which will allow you to see if the company is listed as a firm you should avoid.
How do scammers target pension annuities?
An annuity is guaranteed to pay you an income for a fixed time or until your death. After your retirement, you can select to use your pension funds to buy an annuity. You may be approached in a scam to convince you to purchase an unsuitable annuity product or one at an inflated price. They may also offer a cash incentive to encourage you to sign.
What's a Pension Liberation Scam?
Pension Liberation Scams try to convince you to take an early pension release and access your pension before you turn 55. You will not only face a high tax bill for releasing your fees early, but you will most likely be asked to transfer your funds into an unregulated scheme. This could see you lose all your funds to fraud or bad investment
There are many ways fraudsters can try to con your out of your pension fund, but being careful with your private details and watching for these warning signs can help protect your pension pot.