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