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Home / Mis-Sold Pensions / How to spot pension scams

How To Spot Pension Scams

Learning how to spot pension scams could be the difference between the retirement you’ve planned, and possibly not retiring at all!

Pension scams are a huge threat to peoples’ retirement plans in the UK, and the problem is far worse than most people realise due to a mixture of victims falling silent, and others not yet realising they have fallen into a pension scam.

This all makes our list of ways to spot a pension scam all the more important. Taking a moment to educate yourself and others about the signs of a pension scam could help you save yourself from shaving tens, maybe hundreds-of-thousands of pounds from their retirement fund.

Because pension scams are always evolving, we’ll keep this page updated as and when we get wind of new tactics used by scammers and mis-sellers.

But first, a little background.

If only pension scams were always so obvious

What is a pension scam?

A pension scam is where an individual or group target pension savers to persuade them to make alterations to their pension arrangements (usually a transfer or switch) in order to get their hands on the money, despite it not being in the pension saver’s interest to make the changes.

Scam has more of a legal connotation and usually relates to a criminal act where the “scammers” knowingly and wilfully defraud or lie to the pension saver in order to get them to take actions that benefit the scammer(s), not the pension saver.

In a broader sense, we may include pension mis-selling cases here, which while not always illegal, may have the same effects as a scam and may overlap with the definition on a case by case basis.

Signs of a Pension Scam

1. Cold Call Pension Scams and Pension Reviews

Cold-calls and other types of unsolicited contact via email, text and post are still the number one sign of a pension scam.

Over the last 2 decades, millions of calls were made by unregulated marketing companies to unsuspecting pension savers in an effort to persuade them to transfer their pensions.

The reason? Pension and investment companies were paying BIG commissions to these marketing firms for sending business their way, even if it meant that people would ultimately lose money in high-risk and unregulated ventures. In many cases, these pension savers never fully understood the risk they were undertaking with these transfers which were often to SIPP, SSAS and QROPS type pensions.

In most cases, these calls are made by unregulated marketing companies offering ‘free pension reviews’ rather than bonafide financial advisers, although there is often one behind the scenes ready to rubber-stamp a negligent pension transfer.

The issue of pension cold-calling became so problematic that the practice was made illegal in Feb 2019 after lengthy petitioning from both inside and outside of the industry.

2. Early access to pension cash and/or cash incentives

Pension rules mean that the money inside the pension is intended for retirement and my only be accessed after 55 (except in certain special cases, such as serious health complications that have resulted in a shortened life expectancy).

However, many people are told by scammers that they can access their money earlier if they transfer to a recommended scheme.

Drawing money from a pension before 55 is sometimes possible, but there are often huge tax implications which can shave thousands, even tens-of-thousands off the pension value.

In many cases, the money never materialises after the transfer, which may not even be to a recognised scheme, or sometimes while the scheme may be regulated, the investments inside may not be. Once the money is invested abroad, it can be difficult to get back, and may disappear.

3. High Pressure Tactics

Pension scammers often use high-pressure sales tactics in order to force a hasty decision from their target. In some cases, the scammer may still appear polite and to be trying to persuade the intended victim that the action (usually a pension transfer) is in their best interest, but really they are pressuring them into a decision before they’ve had chance to evaluate the offer or get a second opinion. Look out for lines similar to:

  • “If you don’t make this decision in the next 24 hours, the opportunity is going to pass you by”
  • “I think if you don’t do this now, you’re going to regret it later”
  • “I can only hold this offer for you for another few hours, then you’re just going to have to make do with your old pension”
  • “If you want to retire then you HAVE to do this deal”
  • “I’ve invested in this myself, would I have done that if it wasn’t the right thing to do?”
  • “I’ll send a courier for the documents”

Other tactics may involve making the target emotional about their retirement so they make a decision based more on their emotions instead of facts and logic.

4. Loopholes and Tax Incentives

Similar to point two, the scammer tells the target that they can benefit from tax loopholes by transferring the pension. Often, this can mean transferring abroad and outside of the regulation of the FCA.

Not only might it mean a letter from the HMRC, but it could mean losing money abroad too.

5. ‘High Reward, Low Risk’

If investment opportunities that paid high returns with low risk were common, we’d all be invested in them. Sadly, going after high returns usually means undertaking high risk.

Scammers and mis-sellers often tell people that investments offering big returns are actually low-risk, leading them to make a transfer that is not suitable for them, and may lose them money.

In the meantime, high-risk investments often pay the biggest commissions to marketing firms and financial advisers.

This tactic usually involves types of pensions that allow a greater range of investment choice such as SIPPs, SSASs and QROPS.

6. Cloned or fake firms

Some scammers may pretend to be representing legitimate companies (cloned firms).

All individuals and companies that are authorised to give financial advice by the FCA are registered on the regulator’s website. If the FCA is aware of a cloned form operating using another authorised firm’s name, they often post a notice on their website under that name too.

In some cases, scammers may claim to be operating in a way that is ‘backed’ by the government or another body, or may incorporate elements of an authority’s name in an effort to appear legitimate and gain the target’s trust.

Typical of scammers using this tactic is that they cannot be contacted via the main telephone number for the real company.

Check Register

7. Final Salary Pension Transfer

Final salary pensions are considered to be some of the most valuable around, and transferring them in seldom in the pension scheme member’s best interests.

While there are instances where a final salary pension transfer may be suitable (such as perhaps a single person with a shortened life expectancy), they are few and far between.

If a marketing firm or adviser is putting on pressure to transfer a final salary pension based on promises of more money in retirement, they may be simply trying to earn a lucrative transfer fee, sometimes worth thousands.

Not all final salary pension transfers are scams or examples of mis-selling, but many are, and the regulators at the FCA are cracking down on bad advisers who give negligent advice.

Can You Claim?

What to do if you suspect a pension scam?

If you suspect you may be the target of a pensions scam then there are services you can speak to get clarification and further information.

The FCA operates ScamSmart – an online service that allow you to check any pension proposals or companies you are dealing with against a known database of potential scams and scam companies. It also allows you to report a potential scam to help others too!

If you suspect you already may have fallen for a scam pension transfer and want a second opinion, get in touch with Get Claims Advice Ltd.

While we are not always able to help with every type of pension scam, it may be that you can hold a company accountable for their role in the scam if they are FCA regulated.

We offer a FREE initial assessment service – your opportunity to chat with an experienced pension mis-selling specialist to help identify if you have been scammed or mis-sold. It may be that there is a way to make a claim for negligence on the part of a pension provider or financial adviser.

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