Practical advice for avoiding pension scams

Fraud­sters have ramped up their attempts to swin­dle peo­ple out of their sav­ings in the last year. The Finan­cial Con­duct Author­i­ty (FCA) opened 24 per cent more pen­sion scam cas­es in 2020 com­pared to 2019 and the Pen­sions Reg­u­la­tor is cur­rent­ly inves­ti­gat­ing more than £54 mil­lion of lost mon­ey. 

Scam­mers are tak­ing advan­tage of the increased finan­cial vul­ner­a­bil­i­ty of so many peo­ple across the coun­try. One in four UK adults, or 14 mil­lion peo­ple, cur­rent­ly have low finan­cial resilience as COVID-19 has bat­tered incomes, pen­sion funds and over­all secu­ri­ty. 

Pro­fes­sor David Blake, direc­tor of the Pen­sions Insti­tute at London’s Cass Busi­ness School, says: “Peo­ple who have lost their jobs have become des­per­ate to find a way to pay the bills. If they are over 55, then the pen­sion pot is an obvi­ous thing to raid.” 

Fraud­sters have become more sophis­ti­cat­ed in their tar­get­ing. Peo­ple are spend­ing a lot more time online as a result of lock­down and unscrupu­lous schemers seize on this, with a rise in fake com­par­i­son web­sites or social media adverts that can be dif­fi­cult to dis­tin­guish from legit­i­mate ser­vices.  

Ever-chang­ing scam tac­tics mean an already com­pli­cat­ed invest­ment, which hinges on com­plex terms like longevi­ty risk, infla­tion risk or invest­ment risk, has become even more dif­fi­cult to nav­i­gate and pro­tect. This presents a gold­en oppor­tu­ni­ty for fraud­sters, who thrive on con­fu­sion and con­sumer trust.

Be vigilant and avoid cold calls

Claire Trott, head of pen­sions strat­e­gy at wealth man­age­ment firm St. James’s Place, rec­om­mends vig­i­lance at all times. “Know who you are talk­ing to, ask for proof of iden­ti­ty and do not take any unso­licit­ed calls,” she says. 

Many peo­ple believe they know the tell-tale signs of a scam. How­ev­er, recent research from the Finan­cial Con­duct Author­i­ty (FCA) and the Pen­sions Reg­u­la­tor shows, alarm­ing­ly, almost half of UK adults aged 45 to 65 with a pen­sion would take one or more actions that could expose them to com­mon scam tech­niques. This includes almost a quar­ter of peo­ple (23 per cent) admit­ting they would engage with a cold call about pen­sion plans, despite their ille­gal­i­ty. 

While cold call­ing is cer­tain­ly not the exclu­sive domain of pen­sion fraud­sters, it was banned for pen­sions in 2019. Any unso­licit­ed phone call about a pen­sion is there­fore like­ly to be a scam. 

In Trott’s expe­ri­ence, callers tend to pace them­selves; they might encour­age fur­ther engage­ment by ask­ing vic­tims to vis­it a web­site or agree to receive so-called advice, which is the point where some­one becomes trapped. She sug­gests any­one on the receiv­ing end of a cold call try­ing to ped­dle pen­sions reminds the caller they are break­ing the law and can face fines of up to £50,000.

Beware of so-called freebies

There’s no such thing as free pen­sions advice, accord­ing to Tom Sel­by, senior ana­lyst at invest­ment plat­form AJ Bell. He urges peo­ple to be wary of any­one offer­ing finan­cial sup­port with­out ask­ing for any mon­ey in return, such as a “free pen­sion review” or “ear­ly access schemes”. The tempt­ing offer of con­sul­ta­tion allows scam­mers to see per­son­al and pre­cise details, while there’s no access to pen­sions before 55 unless some­one has seri­ous health issues. What’s more, funds tak­en out before that age are sub­ject to espe­cial­ly high tax­es.

Sel­by encour­ages peo­ple to dou­ble-check any advis­er’s cre­den­tials on the FCA reg­is­ter, espe­cial­ly if oppor­tu­ni­ties sound too good to be true, as schemes offer­ing high guar­an­teed returns are often at the heart of pen­sion and invest­ment scams. “The gold­en rule should be if you are in any doubt about whether or not the firm you are deal­ing with is legit­i­mate, do not part with your hard-earned sav­ings,” he says.

Any­one try­ing to hur­ry along deci­sion-mak­ing about pen­sions should also set off instant alarm bells. Dr Anna Til­ba, asso­ciate pro­fes­sor in strat­e­gy and gov­er­nance at Durham Uni­ver­si­ty Busi­ness School, has noticed the COVID-induced boom in scams. She advis­es peo­ple to not be forced into mak­ing a quick deci­sion about some­thing with life­long con­se­quences. 

“The scam­mers may try to pres­sure you with ‘time-lim­it­ed offers’ or even send a couri­er to your door to wait while you sign doc­u­ments,” says Til­ba. Peo­ple should walk away if con­front­ed with pushy tech­niques and not sign any papers with­out seek­ing vet­ted, reg­u­lat­ed advice. 

Raising awareness to save hidden victims

Mar­garet Snow­don set up the Pen­sion Scams Indus­try Group to help the sec­tor act against the increase in fraud­u­lent activ­i­ty. She believes the num­ber of report­ed vic­tims rep­re­sents a frac­tion of actu­al cas­es, which means the preva­lence of scams isn’t ful­ly under­stood. 

One of the ter­ri­ble effects of being scammed is vic­tims can feel too ashamed to report inci­dents. The report­ing process isn’t straight­for­ward or par­tic­u­lar­ly user friend­ly, so there can be both emo­tion­al and tech­ni­cal bar­ri­ers. 

Snow­don urges any­one affect­ed to con­tact Action Fraud, the UK’s report­ing cen­tre for fraud and cyber­crime, and take free guid­ance from the Pen­sions Advi­so­ry Ser­vice, as there is help out there. “Report­ing needs to be pub­li­cised and eas­i­er to do or the prob­lem will con­tin­ue to be under­es­ti­mat­ed,” she says. Rais­ing aware­ness can also pro­tect oth­ers from falling into the same trap. 

As the pan­dem­ic threat­ens so many people’s finan­cial secu­ri­ty, it’s more impor­tant than ever to exer­cise extreme cau­tion with mon­ey. Fraud­sters tar­get pen­sions because they’re one of the largest invest­ments a per­son will ever accrue. There’s some­thing par­tic­u­lar­ly heinous about dev­as­tat­ing finances that keep peo­ple afloat once they leave the work­place. Once those life sav­ings are gone, they’re often impos­si­ble to get back.