Scam awareness month: What you need to know to spot a pension scam

Have you ever been targeted by a scam? Fraudsters are becoming more sophisticated, and their scams can be hard to spot. This Scam Awareness Month, learning how to protect your pension could safeguard your retirement plans.

According to Action Fraud, in the first three months of 2021, fraudsters took £1.8 million from pensions. Victims have made 107 reports of pension scams during this period. However, this may just be the tip of the iceberg. Some savers that have fallen victim to a scam may not realise it yet or have not reported the crime.

14 million Brits worry about pension scams

If you worry about falling victim to a pension scam, you’re not alone.

Given the huge impact a pension scam can have, it’s not surprising that millions of adults say they fear falling victim to one. An LV= survey revealed that 27%, the equivalent of 14 million people, worry that they may unwittingly fall prey to a pension scam.

Nicola Parish, the Pension Regulator’s executive director of frontline regulation, said: “Pension scams are devastating with victims potentially losing life-changing sums. Savers must be cautious about making decisions about money that may have taken a lifetime to build, as it can be snatched away in an instant.”

Losing some of your pension savings can be devastating as you often cannot recover the loss. It could mean the retirement you’ve worked decades for is no longer possible. It could mean that you have to scale back plans, work for longer, or that you face financial insecurity in your later years. Understanding how pension scams work now can help protect your future.

So, what can you do to protect your pension?

5 things to keep in mind to protect your pension from scammers

1. Be cautious if you’re contacted out of the blue

The LV= survey found that 14% of UK adults have received unsolicited emails, texts, or calls about transferring or releasing money from their pension.

You should treat all contact out of the blue with caution. Cold-calling about pensions is banned, including text messages and emails. Genuine financial advisers or planners that you want to work with will not contact you out of the blue. Scammers may try to entice you with offers like a “free pension review” or “pension liberation” that will allow you to access your pension sooner or reduce tax. These phrases are red flags.

2. Check who you’re speaking to

Even if you’re expecting to be contacted about your pension, you should always check who you’re speaking to. The Financial Conduct Authority register can help you check if the person you’re speaking to is regulated.

Keep in mind that some scammers will use the details of real firms to encourage you to talk to them. Only use the contact details listed on the register and if you’re unsure, hang up and contact the firm directly using these details to check.

3. Understand your pension options

Fraudsters rely on victims not understanding their pensions fully to pull off a scam. For example, pensions are not usually accessible until you are 55 (rising to 57 in 2028) but scammers will often claim they can help you access it earlier. They may also suggest unusual ways to access your pension to minimise the amount of Income Tax due.

Understanding how your pension works and your options when you retire can provide you with the insight needed to spot a scam. If you’d like to discuss how you can access your pension, please contact us.

4. Be cautious of high returns, guarantees, or unusual investments

Investing is a way to grow your wealth and it’s normal to want to get the most out of your investments. However, claims of high returns, especially guaranteed returns, are likely to be a scam. Remember, if it sounds too good to be true, it probably is. All investments come with some risk and returns cannot be guaranteed.

Some scammers will also suggest you withdraw money to invest in unusual assets, such as overseas property or forestry. Keep in mind that your pension savings are usually already invested, and a pension provides a tax-efficient way to do so.

5. Don’t rush into making decisions

Finally, you’ve taken decades to build up your pension pot, so don’t make a snap decision when deciding how or when to access it. Scammers will try to pressure you into making quick decisions, so you don’t have time to think clearly. They may pressure you by offering time-limited deals or even sending a courier to your home with documents. Don’t be afraid to take a step back and ask for some time, a genuine financial adviser will understand.

Sometimes, simply speaking to someone about your plans can make it clear that an opportunity is a scam. If you’re not sure if you’re being approached by a scammer, you can speak to us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.