Pension scams and how to avoid them

Scammers are often unknown contacts who will attempt to gain your trust by making false claims. They will likely say they are authorised by the FCA and present unsolicited but attractive investment opportunities, in an attempt to gain control of your pension pot. In other circumstance the money may be stolen outright.

If an offer seems too good to be true, it likely is just that. Some warning signs to watch out for include low risk, high return investment opportunities, “free” pension reviews, aggressive sales tactics and complicated investment plans, where it is unclear where your money will end up. If you are called by an unknown number and presented any of these opportunities, it is almost certainly a scam. You should be aware however, that following the cold call ban of 2019, many scammers focus on social media to reach people.

Another way scammers operate is to ask their victims to refer friends, family and colleagues to them. At this point the scammers have usually built a strong relationship with their original victim, who believes they have received a good service. It can be many years before it becomes apparent that someone has lost their pension. If you are referred to someone you are told can help you with your pension, please stay vigilant and check the advisor is who they say they are.

Common scams to be aware of are early pension release and pension review scams. Any scheme offering to help you release cash from your pension before you’re 55 is almost always a scam. Additionally, pension review scams contact people unexpectedly, offering a free pension review. This could be a phone call, an email, text message or an offer in an online advert. Most of the companies offering free pension reviews are not FCA authorised but may falsely claim they are.

Now more than ever is a time to be vigilant. Scammers are actively at work targeting pension pots during the coronavirus (Covid-19) outbreak. The volatility of stock markets during the pandemic has impacted pensions and imposed financial difficulties on many. Some individuals may be tempted to cash in some of their pension. As noted, this isn’t usually possible before the age of 55, except in cases of ill-health or where you have a protected retirement age that is below 55. Members applying for a CETV quote from a defined benefit (DB) to a defined contribution (DC) scheme should be particularly aware of the risk of scams during Covid-19. As with the majority of pensions scams, fraudsters promise high returns and low risk. If a saver asks about transferring their pension, urge them to exercise extreme caution.