Pension freedom scams and how to avoid them

2nd October 2017


The City of London Police’s recent figures indicates that losses from pension scams hit a record high in March 2017, with victims losing a total of £8.6 million.  Numerous reports have placed the blame for the surge in pension scams on the ‘pension freedoms’. Also, on 20 September 2017, MPs launched a wide ranging probe into these major reforms.

The aim of pension freedoms was to give savers a choice over how they use their savings, making it much easier to remove funds in later life.  However, this has opened up the market to scammers, who take advantage of savers hoping for a higher return on their savings.

The most common scams involve savers being persuaded, sometimes by cold-callers, to put their money into other assets, such as property loans and overseas investments.  Some victims are persuaded to withdraw their money from the security of final-salary schemes.  Figures suggest that savers may have lost an average of up to £120,000 each.

How to protect yourself against pension scams

Scammers will often target savers who are vulnerable or have less experience in investment.  To combat these fraudsters, the Pensions Advisory Service has offered some advice to help savers to remain vigilant and keep their money secure. We encourage you to visit for further information, but in summary:

1. Beware of cold-callers

Despite the poor reputation that cold-callers already have, many savers are being tricked out of their life savings through this method.  Often, cold-callers will claim to be phoning from reputable organisations, such as Pension Wise, or other government-backed bodies in the hope of encouraging you to part with your pension.

Always bear in mind that a reputable organisation will not cold-call, send unsolicited emails or texts.  Be aware that cold-callers offering to carry out a pension review may not be acting in your best interest, and refrain from giving your details to them.  If you are unsure, take their details and conduct your own research.

2. Don’t be pressured

Scammers will encourage a saver to make a quick decision, insisting that the offer will only be available for a limited period.  If you feel like you are being rushed, it is likely to be a scam.

Scammers have been known to send a courier to a saver’s home, who will wait whilst they sign documents.  Even if you feel like you may be turning down a “once in a lifetime” deal, take your time.

3. “Guaranteed returns” should trigger a warning

A trick that is often seen in pension scams is the promise of guaranteed returns.  The exotic nature of some unregulated investments appeal to many savers and, when sold with a promise of guaranteed returns, can seem to be an offer not to be missed out on.  Ensuring that you are entirely comfortable is the best way to avoid a scam – if it feels too good to be true, it most probably is.

4. Ensure that your adviser is registered with the Financial Conduct Authority

Regulated financial advisers are an excellent source of information and advice to savers considering the best options for their pension.  However, it is always worthwhile taking to time to carry out research in respect of an individual or company claiming to be a financial adviser.

Scammers will try to gain the trust of a saver by posing as a financial adviser and persuading you to invest your money in various potentially fraudulent schemes.  Try not to limit yourself to simply browsing the company or individual’s website or other marketing materials – take some time to check whether the individual you are talking to is registered with the Financial Conduct Authority and whether they are authorised to provide advice in respect of pensions.

Regulation with the Financial Conduct Authority may mean that you are protected by the Financial Ombudsman Service or Financial Services Compensation Scheme should anything go wrong.

5. Don’t rely on recommendations

When it comes to your savings you should ensure that you are confident and comfortable.  Even the most financially aware friends and family members can fall victim to scams – by carrying out your own research you can avoid falling victim to the same scam.

If you have been contacted and any of the following are offered or used, warning signs should be triggered:

  • A free pension review;
  • Guaranteed returns;
  • Tax-free rates;
  • Exotic sounding investments; or
  • Pressure is exerted.

If any of the above apply to the advice you have been given, proceed cautiously and carry out your own research.  Make sure that you seek professional advice to protect your hard-earned savings.

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