The Pensions Regulator has warned
pension scheme members to remain vigilant
against scams. They issued the warning in conjunction with the Financial
Conduct Authority and the Money and Pensions Service. It comes after the
regulator published a report
showing an increase in brand impersonation and
cloned companies. Pension scams can have devastating consequences for their
victims. To avoid falling victim to a scammer, it’s prudent to know what the
main scams are, and how to avoid them.
Pension liberation scam
Not to be confused with ‘pension unlocking’, a pension liberation scam
involves the scammer offering to release money from a member’s pension before
they reach the age of 55. However, accessing
a pension before reaching the age of 55
is only possible in rare
exceptions, such as a person suffering a terminal illness.
Drawing on your pension in this way can land a member with a tax bill both
large and unexpected. Action Fraud
, the UK’s national reporting centre for fraud
and cyber-crime, says: “Tax charges of over half the value of your pension
could fall on you for taking an ‘unauthorised payment’ from your pension fund
in this way. In addition, fees deducted from your pension for the transfer are
unlikely to be recovered.”
Pension transfer scam
A pension transfer scam is where a scammer contacts a member to warn them
that their pension is underperforming. They advise the member to transfer their
pension to a separate scheme and may encourage the member with hollow promises.
The scammer may then steal the money outright, or invest it in high-risk
investments such as overseas property and hotels or renewable energy bonds.
Savers should remain guarded against tell-tale signs of a scam, including
guarantees of a higher return, high-pressure sales tactics, and fixed-term
High-pressure sales tactics
The Pensions Regulator says the use of high-pressure sales tactics should be
read as a warning sign of a scam. The body warns of time-limited offers to secure
the best deals, and the use of couriers to send documents, who will wait until
the relevant documents are signed.
common high-pressure tactics
include: scare tactics, persistence that
becomes pestering and using guilt to induce an agreement, according to guidance
issued by the Citizens Advice Bureau.
High-pressure tactics are often employed in conjunction with other types of
scams, such as pension liberation, pension review and pension transfers.
Often the high-pressure scammer will encourage their would-be victim to move
their pension into high-risk investments. Thismoney.co.uk
reports the story of Pauline Padden. After being convinced by a scammer, she
invested her pension in a long-term hotel building in the Caribbean. Six months
later, Ms Padden realised she had fallen prey to a scammer and had lost £45,000
as a consequence.
If something seems too good to be true, it probably is. The most prudent way
of avoiding pension scams is to follow the advice of reputable bodies. Don’t be
rushed; take independent financial advice, and carefully consider every new
Remember the warning signs. If promised the ability to release your pension
before the age of 55, remember this is illegal in many jurisdictions and can
land you with a significant tax burden. Don’t be rushed; take your time, and if
in doubt, seek independent financial advice.