Identifying a Pension Scam

New pension reforms were introduced on 6th April 2015 which will change the face of retirement income in the UK forever.

It allows citizens better control and flexibility to access their pension pot. But a lot of questions still hang in the air as people are not fully aware of the changes.

Fraudsters see this as a perfect opportunity and time, to strip the hard earned money off gullible retirees.

Pension Scams of multiple varieties are on the rise in the UK.

From an email that pops out of the blue, promising incredibly high returns from ‘creative’ investment options, to a phone call that lures you into believing that you can get access to your pension pot before the age of 55, there are many ways in which a pension shark may approach you.

The only way you can protect your life savings is by being aware and spotting a scam a mile away.

The Modus Operandi

Most pension fraudsters will try to entice you into transferring the funds in your pension pot in exchange for lucrative returns on bogus investments.

You may receive an email, a phone call or a conman may turn up at your doorstep.

The person will look like a legitimate representative of a pension company and will sound extremely convincing.

They may even have a very attractive website that may have the words, ‘Pension’ or ‘Wise’ in their name, to fool people into believing that they are a part of the government Pension Wise service.

You are more likely to be contacted by scammers if you are nearing retirement.

The Common Ones

Over the years, many retirees have been scammed off their hard earned money by scammers who keep coming up with innovative methods.

These are some of the common ones that you may be approached with:

  1. Free Pension Review: This is one of the most commonly used methods by fraudsters. You may be contacted by companies that claim to work on behalf of the government offering you free guidance on investing your pension funds. Typically, retirees are asked to move their funds into self-invested personal pensions (SIPP) with unregulated investment options like forestry, wineries, storage pods, cement factories in Nigeria, properties in overseas destinations like Costa Rica and rainforest harvesting.
  2. Pension Liberation Plan: The only way you can get access to your pension funds before the age of 55 is if you are batting ill health. Fraudsters who offer ‘Pension Loans’ or ‘Pension Liberation Schemes’ hide the fact that you may lose up to 70% of the liberated pension amount as taxes by the HMRC. This will be in addition to up to 30% charges by the fraudsters themselves leaving you with virtually nothing.
  3. Common Names: These are some of the terms that should immediately draw a red flag. One-Off Investment Schemes, Legal Loopholes, Government Endorsements, Overseas Investments and Creative Investments. The general thumb rule is to avoid any investment option that you receive via cold-calls.

Protect Yourself

It is important to know that the government will never contact you or encourage you to make investments in get-rich-quick schemes.

So, if you receive a cold-call from someone who claims to represent or work on behalf of the government and asks for details about your pension pot, do not reveal the information. The best you can do is hang up. Alternatively, you can ask them if you can call them back.

Most fraud companies do not want you to call them back and will refuse.

If they agree and provide you with a phone number, call the Financial Conduct Authority (FCA) on 0800 111 6768 to verify if the person or company calling you is legitimate.

The FCA register has details of all licensed pension providers. Call back the company or person on the number provided in the FCA register and not the one they provided you with.

Do not be rushed into making a decision no matter how lucrative the investment option seems or how urgent they make it appear to be.

Always seek the advice of an independent professional before you agree to transfer your pension pot to any SIPP.