Back in 2015, the Pensions Scams Industry Group (PSIG) was voluntarily set up to look into the causes of pension scams – a huge part of the fight against people losing their pensions.
Using data collected from three different pension providers, they’ve probed into over 27,000 pension transfers from Defined Benefits pension schemes worth over £1.33 billion, and have now published 10 ‘red flags’ of a potential pension scam.
Take a look!
1. Unregulated marketing companies
Easily sign number one, 52% of the red flags raised by the reports involved cases where an “unregulated intermediary” was involved. In simpler terms, this is where a marketing company or cold-caller that’s not regulated to give financial advice is involved. These companies are often sales and commission driven rather than impartial advisers, and may be happy to push people towards a dodgy pension transfer with little risk of being held accountable.
2. Unaware of adviser
Financial advisers are supposed to get to know a person’s circumstances before giving advice so they can ensure they are advising in their best interests. Many people transferred their pensions without even meeting their advisers or having little-to-no communication with them. The adviser may have simply ‘rubber-stamped’ the paperwork and took their advice fee.
3. Cold Calls
Related to Red Flag number one, the pension saver initiated their pension transfer after received a phonecall out of the blue. This practice has now been banned since January 2019 after years of petitioning and debate.
4. Low Understanding
In 49% of cases where a scam was suspected, a low understanding of the pension transfer, advice and fees was detected – people simply weren’t being told enough about what was happening with their pension, or lacked the ability to understand, making it easier for scammers to skip over important details.
5. Advisers being watched
The FCA regulates all financial advisers, doing their best to make sure advisers follow the rules to protect pension savers. In many suspicious pension transfer cases, the adviser involved was already on a watch-list over previous concerns.
6. Dodgy new scheme
In 19% of suspicious cases reviewed, the new pension scheme (where the money ended up) was subject to due diligence concerns, with some spending as little as 15 minutes to make sure everything looked right. Due diligence processes are there to protect people from potential scams by looking into the details.
7. No paperwork
In some cases, no paperwork from the receiving pension scheme was identified as a red flag.
8. Promises of tax-efficient access to money
In some suspicious cases, pension savers were told they would have better access to their pension funds tax efficiently. In some cases, this may not be correct, and could be used to tempt people into a scam.
9. Guaranteed promise of returns
20% of red flags involved a promise of a guaranteed return on their new pension investments, or guaranteed access. Investment values can often go down instead of up.
10. TVAS not provided
A Transfer Value Analysis System (TVAS) report helps people make an informed decision as to whether transferring a pension may be to their advantage. In some cases, no TVAS was provided making it difficult for people to make an informed decision.
Difference between pension scams and mis-selling
Scams have a criminal element to them, where as mis-selling may be down to straight up negligence.
We know a few things about pension mis-selling, having helped our clients recover over £50 million* from mis-sold pensions, always on a no win – no fee* basis.
Each claim began with a FREE initial assessment – a no-obligation chat on the phone with one of our experienced case assessors to test for signs of mis-selling.
Book yours today to check you aren’t walking into a potential loss on your retirement fund.