How to avoid pension scams

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 pension investments.

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. Other 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. 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. Remember 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 pension opportunity. 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.


Do you need guidance on your pension? Get in touch today to be put in contact with a UK pension specialist.

Tell Me More