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Don’t be scammed by a pension scam!

Jasmine Birtles 12th Jun 2021 No Comments

Can you spot a pension scam? Many people can but, like so many frauds and scams nowadays, the perpetrators are coming up with new angles all the time, so many of us are getting taken in.

Find out how to spot a pensions scam and what to do to make sure you keep your retirement pot safe.


why we need to get clued-up about pension scams

Big pension scams have been going ever since the government allowed us to access our defined contribution (DC) pensions from the point of retirement. It used to be that we had to buy an annuity with most of our pension pot but from 2015 we could access all of our pension savings from age 55 and do what we wanted with them.

It has made pensions more popular and, in many cases, has enabled people to make more money from them than they would have with an annuity.

But it’s also been a bonanza time for fraudsters as they have rung up people at or near retirement offering them fabulous deals if they will move their money to some new, wonderful investment product that they sold excitedly to them over the phone.

Many people have lost their life savings this way, although, because of their problems, some others have learnt their lesson and are getting good at spotting the scams.

Sarah Coles from Hargreaves Lansdown says, “We’re often told to beware of things that are too good to be true. The trouble is that most of us can’t tell whether an offer is reasonable and genuine, or wildly unlikely.

“The good news is that we’re getting much better at spotting common scams, like bogus pension reviews. We’re also familiar with high pressure sales tactics the scammers use.”

But she adds that there are other scams we could fall victim to, because they take advantage of gaps in our knowledge. For example, research by Hargreaves Lansdown has found that

  • Only one in four people recognise when guaranteed returns on offer are too good to be true, and that anything offering 3% or more in the current market without any risk at all should ring alarm bells.
  • More that one in four people wouldn’t be worried until a scammer was holding out the hope of a ‘sure thing’ paying 10% or more.
  • We can also be foxed by complex investment structures, or by convincing scammers who tell us we don’t need to understand what we’re getting into, we just need to sign on the dotted line.


tell-tale signs that you’re dealing with a pension scam

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Hargreaves Lansdown has given this list of clues you can pick up that will show you the salesperson is scamming you:

  1. You’re offered early access to your pension – before the age of 55 – and you’re not warned that you will face hefty tax penalties for doing so. Anyone accessing their pension early will have to pay extra taxes that will eat into your profit.
  2. Limited time offers. These are designed to put you under pressure to make a move before thinking it through or talking to anyone else about it, and they’re a classic scammer move.
  3. You’re contacted out of the blue. This should always ring alarm bells, but particularly so when it comes to pensions. It’s now illegal for anyone but your own pension provider or an FCA authorised firm to cold call you about your pension.
  4. Being promised guaranteed, safe returns at an excessive level. We know this is a sign of a scam in theory, but in practice we have real difficulty in identifying what qualifies as excessive.
  5. They’re not regulated by the FCA. They might claim to be, and it might be on their website, but the only way to be sure is to check the FCA website.
  6. They don’t let you phone them back. This could be a clone firms, where a scammer claims to be a big reputable company. Some of these are pretty sophisticated, and they have fake websites and fake call centres. However, they won’t ever let you call back on a number you already have for the company.
  7. The investment feels familiar. Scammers know that for many pension savers, investing in shares seems a bit removed from the rest of your life. They persuade you to switch into what’s actually a far riskier and more esoteric scheme (which may not actually exist or may come with exorbitant charges) but is already part of your life – like hotel rooms or car parks.
  8. There’s a complicated investment structure. There are schemes that transfer your money around different companies and geographies and claim to be able to beat the system. If the structure is too complex to understand, there’s a much higher risk you’re being conned. And even if the scheme works in theory, in practice each time your money moves you’ll pay handsomely for the privilege.
  9. They give you the answers to questions your pension company might ask. If your existing pension company asks questions, you should understand what you’re switching to so well that you can answer them easily. If you need to be coached on the ‘right’ answers, then at the very least you’re getting into something you don’t understand.
  10. Your pension company is worried. The only reason the company will start asking lots of questions and flag it up as a worry is if they are genuinely concerned about a transfer. If they’re worried, then make sure you’re completely comfortable with what you’re getting into.


how to get proper advice about your pension

Managing your pension (and other investments) is really important as it’s about funding the rest of your life. Happily there are places you can go to get good advice.


Pensionwise is a free service that you can get if you’re 50 or over. It’s for those about to retire and wondering what to do with your pot of money.  It was also launched in April 2015 and the advice is given by independent organisations: The Pensions Advisory Service (TPAS) and Citizens Advice.

To get your free advice session you can call them on 0800 138 3944. You can set up either a telephone consultation or a face-to-face session.

speak to a financial advisor

An independent financial advisor (IFA) does cost (probably around £2,000 for proper retirement planning) but it’s really worth considering this just to make sure that you are financially covered for your retirement.

A proper financial advisor will ask you questions about your money, what you’re aiming at doing with your retirement, what your family situation is and whether you have dependents. They will look at your savings and investments as well as your liabilities (mortgage, supporting dependents and so on) and will create a plan for you.

They may suggest moving your investments and they may come up with ways in which you can make your money go further if it needs to. They will also help you with other elements such as life insurance, preparing for care and setting up a power of attorney.

If you don’t have an independent financial advisor that you can call on, look for one at VouchedFor where IFAs are recommended by former clients.


good news coming about pension scams

Happily the government has (slowly) worked out that pension-scamming is a serious issue and they’re planning on introducing a new level of protection, which could be in place by the end of the year.

Currently, if you’re taken in by a scammer and you ask your current pension scheme to move your money, all they can do is warn you it’s a scam.

Under the new rules that are supposed to come in soon, schemes would have the power to block transfers to what they know are actual scams (they raise a red flag in the system).

For those that raise an amber flag, they could refer you to the Money and Pensions service, so someone independent can talk you through the potential risks.


Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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