Pension fraud: a guide on how to avoid pension scams

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MoneyPlus Features Team

June 06, 2022

5 mins read

Wherever there is money, there is also likely to be fraud and, sadly, online crime surged during the pandemic and hasn’t slowed down since. To mark Scams Awareness Month, we have some tips on how pension scams work, how to spot the warning signs of pension fraud, and how to keep your pension savings safe from scammers.

What is pension fraud?

The aim of pension fraud and scams is to trick you into handing over your pension savings. This could involve you transferring your pension pot into a non-existent or high-risk scheme or being persuaded to release cash from it. 

Scammers often try to tempt their victims with offers of better returns, one-off opportunities or early access to cash. These offers turn out to be empty.

Figures from 2021 show the average pension fraud involved over £50,000 of savings, with losses ranging from less than £1,000 right up to £500,000. Even before the Covid-19 surge in online fraud, estimates from the Pensions Scams Industry Group suggest that up to 40,000 people lost money to pension scams in 2015-20. 

If you do fall victim to a pension scam, it’s likely you’ll find it very difficult to get your money back. That’s why it’s important to understand the steps you can take to help keep you and your money safe.

How pension scams work

Pension scammers can be very convincing, regularly developing new frauds and techniques to draw people in. Known scams include:

  • Luring you in with the promise of ‘higher’ or ‘guaranteed’ returns, perhaps through investments like overseas property and hotels, renewable energy bonds, forestry, parking or storage units
  • Telling you that you can access your pension savings early through a loan or loophole. With this type of scam, you could be hit by a double blow: not only losing cash but facing a high tax bill if you access your pension plan before the current minimum age of 55  
  • Using online fraud techniques, such as ‘phishing’, to gain access to, and then steal from, your pension pot

These scams can hit you at any age or stage of life, whether you’re paying into a pension plan or taking money from one. Pension scammers often prey on anxiety, for example promising higher returns to savers when stock markets are falling or offering pensioners the prospect of extra cash to weather the cost of living crisis.

Warning signs of a pension scam

A pension scam often starts with an out of the blue email, letter, direct message on social media or phone call (pensions cold-calling was banned in 2019 but scammers may still do it). The fraudster may describe themselves as a pension adviser or pretend to represent a government agency, legitimate financial services firm or well-known personal finance expert. 

Scammers also post ads online, although measures to protect people from fraudulent paid-for ads will be included in the UK government’s Online Safety Bill, which was carried over in the Queen’s Speech in May.

Regardless of how you are approached, warning signs highlighted by the Pensions Regulator include:

  • Phrases like ‘free pension review’, ‘pension liberation’, ‘loan’, ‘savings advance’ or ‘cashback’
  • Offers of guaranteed or high returns from unusual, unregulated or overseas investments, offering no consumer protection
  • Help to release upfront cash from your pension before the age of 55
  • Pressurised sales tactics that refer to opportunities being ‘time limited’ or ‘one off’
  • Complicated investment structures

Remember that pension scammers can be clever and extremely convincing – they have the potential to fool anyone, no matter how savvy you might be. In fact, research for the Financial Conduct Authority (FCA) and the Pensions Regulator suggested that the more highly educated someone is, the more likely they are to fall for a pension fraud. 

How to avoid your pension savings being scammed

We’ve described some of the phrases and offers that should put you on your guard, especially when you are contacted out of the blue. It’s also useful to follow these five simple precautions against pension fraud.

1. Don’t be rushed into anything. If you’re pressured into making a quick decision, there may be something wrong. Always take your time to do some research.
2. Don’t just take their word for it. Scammers may give convincing answers to your questions or tell you about websites or phone numbers where you can check their information. Rather than be sucked in by this apparent openness, do your own research online, using sources other than the ones they recommend.
3. Check the FCA’s Financial Services Register. If the person or firm isn’t listed there, you won’t have access to the Financial Services Compensation Scheme or the Financial Ombudsman Service.
4. Consider getting independent financial advice about any pensions change. If you don’t already have a financial adviser, you can find one at unbiased.co.uk. There’s likely to be a charge for any advice.
5. Brush up on the latest pension scams. There are useful guides on ScamSmart and MoneyHelper, while the National Cyber Security Centre (NCSC) has general advice for protecting yourself and your devices online.

If you suspect you’ve been approached by fraudsters, report it quickly to the FCA online or on 0800 111 6768. If you’ve lost money to investment fraud, report it to Action Fraud online or on 0300 123 2040.

Staying safe online with Standard Life

If you’re a Standard Life pension customer, we have online tools to help you manage your pension plan safely. Registering for online services will give you easy access to your plan, so you can check how much it is worth, manage payments and withdrawals, and do much else besides. 

Remember, we’ll never call you and ask you to log in to your account or send you an email asking for security details or other confidential information.

Also be assured that protecting your data is a top priority for Standard Life. We have multiple technical controls in place along with strong business processes and staff training to help make sure it stays safe. 

For more information on protecting your pension (including details of fraudulent phone numbers and websites to look out for) read our guide to protecting yourself from scams and fraud.

This article shouldn’t be taken as financial advice and is based on our understanding in May 2022.

Standard Life accepts no responsibility for information contained on external websites. This is for general information only.

Laws and tax rules may change in the future and your own personal circumstances, including where you live in the UK, will have an impact on tax.


 

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