Pension contributions are something many people will make during their working lives, with the pension wealth often being intended to be used for a comfortable retirement. Worryingly, new research from the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) has revealed that more than five million people across the UK (42 per cent of pension savers) could be at risk of falling for at least one of six common tactics used by pension scammers. According to the research, carried out as part of a latest ScamSmart campaign, pension cold calls, free pension reviews, claims of guaranteed high returns, exotic investments, time-limited offers and early access to cash before the age of 55 could tempt these savers to risk their retirement income. What’s more, victims of pension fraud reported in 2018 said that they had lost, on average, £82,000.
While the government banned pension cold-calls back in January this year, the Money and Pensions Service are warning savers that they could still be at risk.
Charlotte Jackson, Pensions Expert at the Money and Pensions Service, explained that scams can often have several years prior to the saver realising.
On average, it takes around four years for a person to realise that they’ve lost money in these kinds of scams, she said.
Speaking to Express.co.uk, she said: “[For many,] it will have been a few years ago and they will have been told that they could take a lump sum out of their pension and it would have been transferred into either another way to save or into an investment”.
“Often, the people who are accessing their money just want that 25 per cent tax-free lump sum.”
With some of these savers having accessed the tax-free sum, work and daily life can mean that the rest of the money which was in the pension fund is put to the back of one’s mind.
But, Charlotte explained, when victims come to retire, they could run into difficulties – discovering that they can’t find the where the money is.
Savers may then be unable to get hold with the people they had been leasing with, she added.
“One of the first warning signs most people when they talk to us have is that they haven’t been able to get hold of the people who have got their pension funds,” Charlotte explained.
Ways in which pension savers are approached have been known to vary, and the impact can be huge.
“For most people, the sad reality of this situation is that if people have lost their money to a fraud from their pension pot, the likelihood of them being able to get it back is minimal,” Charlotte said.
“So, prevention and getting the message out about what people should be looking out for, and knowing who to go and talk to, and checking things like the FCA register become really really important.”
She added: “It’s the old age adage of, ‘If it looks too good to be true, it normally is’.”
Charlotte’s top tips for reducing risk of falling victim to a pension scam
- Avoid anybody saying about couriering paperwork
- Avoid hard sales tactics
- Check the FCA directory – and if they’re not sure how to use it, contact the Money Advice Service or the FCA
- Be really suspicious about anybody offering high rates of return at a low risk
- Be aware if people say they are able to help people through some form of tax loop, or promise any other form of extra savings
For more information on how to spot a scam, visit the Pension Scams guide on The Pensions Advisory Service website.
The Money and Pensions Service also recommend seeking independent financial advice from an FCA regulated firm, when considering opportunities.