Pension scams: Make sure you're not swindled

Tuesday 27th August 2019

Pension scams: Make sure you're not swindled

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Article By Dave Morman

Pension scams: Make sure you're not swindled

Some victims of pension scams have lost more than £1m to fraudsters, amid a surge in criminal activity targeting the savings of over-55s.

While the average amount swindled out of pension scam victims was £91,000, some people have lost seven-figure retirement nest eggs, said police and regulators.

The chilling figures have been issued by Action Fraud, which is one of the members of a group called Project Bloom that was set up to tackle the scams. Other members include the Serious Fraud Office, the Treasury and the Pensions Regulator.

Victims of such scams – which typically begin with an unsolicited phone call or email – can end up losing their life savings and people have been urged to be on their guard. A TV advertising campaign to warn the public was launched in August 2018 and a ban on pensions cold-calling came into force at the beginning of this year.

Pension scams often involve people being persuaded to transfer or cash in their pension pots and put the money into sometimes exotic-sounding investments. They have been around for many years but there has been a surge in activity since April 2015, when the government introduced reforms giving over-55s more freedom in terms of what they can do with their retirement cash.

Action Fraud said two people had each reported losing £1m or more. However, a Project Bloom spokesman said: “As it is believed that the majority of scam victims never contact the authorities, this may only be a fraction of the total number of people who have handed over such large pension pots.”

Of cases involving larger sums that have come to light, the Pensions Ombudsman has previously ruled on one involving a man who was persuaded to transfer £367,000 out of an NHS pension scheme and put it all into an investment involving self-storage units that supposedly offered an 8%-12% return!

MPs have previously been told that firms described as “sharks” and “vultures” were preying on British Steel pension scheme members to persuade them to transfer their pensions. Some of these individuals had amassed pension pots of more than £1m.

Pauline Smith, the director of Action Fraud, said: “These statistics prove that the consequences of falling victim to a pension scam can be devastating. Victims can lose their life savings and are left facing retirement with little or no income.”

Regulators say one of the most common tactics is to offer a “free pension review”. Others include a firm or individual unexpectedly getting in touch; promises of guaranteed high returns; offering unusual or overseas investments such as overseas hotels, forestry and green energy schemes; and putting people under pressure to make a quick decision.

How can you spot a scam?

There are some common tell-tale signs that mean it could be a scam:

  • Unsolicited approaches by phone call, text message, email or in person. Since January 2019, there has been a ban on cold calling about pensions. This means you should not be contacted by any company about your pension unless you’ve asked them to.

When a firm doesn’t allow you to call it back.

  • Where you’re forced to make a quick decision, are pressured into doing so, or are encouraged to transfer your pension quickly and send documents by courier.
  • Contact details you are given, or on their website are only mobile phone numbers or a PO box address.
  • The caller claims they can help you or a relative unlock a pension before the age of 55, sometimes known as ‘pension liberation’ or ‘pension loans’. Only in very rare case, such as very poor health, is this possible.
  • They say they know of tax loopholes or promise extra tax savings.
  • They offer high rates of return on your investment, but claim it is low risk.
  • They offer high rates of return on your investment, but claim it is low risk.

Further help

The Financial Conduct Authority’s ScamSmart website has a tool to help you check if an investment or pension opportunity is a scam. If you need further help or advice please contact your Brunsdon Financial Adviser.

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(Please note that Brunsdon Financial is not responsible for the content of third-party websites.)