Staying pension wise

The dangers of pension scams are currently being highlighted by a high-profile media campaign. Adverts, both on television and online, warn pension savers not to let a scammer 'enjoy their retirement'. The perils of cashing in a pension pot without the proper advice and protection under the freedoms introduced in 2015 are spelt out by the ads.

So, it is vital that pension savers are educated to spot a potential scam and avoid it. Access to regulated, impartial advice is a crucial part of helping people make wise decisions with their retirement savings.

Scam victims losing pension pots in 24 hours

The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) have joined forces to highlight the scale of pensions scamming. In a joint report from the two organisations, the FCA suggested that it could take up to 22 years for a saver to build a pension pot of £82,000 – the average amount individuals lost to pension scams in 2018.

But despite this, many savers could be at risk of falling for scammers' tactics, as research reveals that almost a quarter of people surveyed admitted to taking 24 hours or less to decide on a pension offer.

Worryingly, overconfidence could also lead to savers missing the signs of a scam. Two-thirds of savers say they are confident enough to make an independent decision about their pension. The same proportion would trust someone offering pensions advice out of the blue – one of the main warning signs of a scam.

Recognising scam warning signs

It is vital that pension savers are aware of the common tactics used by scammers, so they can spot the warning signs.

Pension scam artists are often articulate and financially knowledgeable. They can often point to credible websites, testimonials and materials that are hard to distinguish from the real thing. They will design attractive offers to persuade the transfer of a pension pot, or the release of funds from it. It is then invested in unusual and high-risk investments like overseas property, renewable energy bonds, forestry, storage units, or is simply stolen outright.

Scam tactics include:

  • contact out of the blue
  • promises of high and/or guaranteed returns
  • free pension reviews
  • access to a pension before age 55 – with no mention of potential tax liabilities
  • complicated investment structures, or unusual, high-risk investments
  • high-pressure sales tactics, or pressure to act quickly.

Protecting your pension

Although a ban on cold calling in the UK, including emails and texts, was introduced at the beginning of 2019, the problem continues. Cold calls are a major red flag for scams and unsolicited offers should be ignored or rejected. Cold callers will often offer a free pension review. Professional advice on pensions is not free – a free offer out of the blue is probably a scam.

It is crucial that pension savers know who they are dealing with so checking the FCA Register is imperative. Dealing with an authorised firm gives access to the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS), which can hold firms to account and give financial protection.

A common scam is to pretend to be a genuine FCA-authorised firm (called a 'clone firm'). The contact details on the FCA Register should always be used, not the details the firm gives out.

Pension savers should never allow themselves to be rushed or pressured into making a decision. They should not be afraid to miss out on an 'amazing deal' because of artificial deadlines, and if promised returns sound too good to be true, they probably are.

Impartial information, financial guidance and advice are all key to making a good decision before changing pension arrangements.

Looking for advice

Free, independent and impartial information and guidance is available from The Pensions Advisory Service, while for those over 50 with a defined contribution (DC) pension, Pension Wise offers pre-booked appointments to talk through retirement options. Those opting for the services of a financial adviser must be sure to use one that is regulated by the FCA.

Further pensions help can be found on the Pensions Regulator, Action Fraud, ScamSmart and Citizens Advice websites.  

Planning for your retirement in advance is vital. We would be only too pleased to provide any further assistance you may need. Please contact us.

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Reza Samii Chartered Accountants, 5 Calico Row, Plantation Wharf, Battersea, London SW11 3YH

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