What is pension fraud?
Pension frauds, or pension scams, essentially target pension scheme members to part with their hard-earned money. Fraudsters might ask their victims to transfer their pension pot into either non-existent or non-genuine schemes set-up to defraud people of their investments. Or, they might offer them cash incentives to gain early access to their pension benefits - referring to them as a pension loan. But these so-called opportunities often turn out to be a scam and leave the pension holder with significant losses and serious tax implications.
The coronavirus outbreak has affected all kinds of companies, including those listed on the stock market. As a result, markets have been volatile and are likely to remain so for a while. This can have an impact on pensions, leading to additional worry for savers. It can also lead to an increase in scams, as unscrupulous people try to take advantage of the situation.
Spotting and avoiding pension fraud
If you're looking to make any changes to your pension arrangements, be cautious and do it the safe way. In other words, do your own research first, and seek advice from an impartial source, such as a financial adviser or accountant. It’s wise to wait until you’re armed with all the right information for your specific needs, before making any changes.
Take your time. Thoroughly check out the firm or person that you are dealing with to ensure that they are reputable and ensure that any provider or scheme you are considering is genuine.
Any cold calling or unsolicited contact by phone, email, online or post should be treated as suspicious. It’s okay to ignore these or put the phone down. Especially, as unsolicited cold calling around pensions was banned in the UK in 2019 and is often likely to be fraudulent. Cold calling is only permitted when:
- The caller is authorised by the FCA or is the trustee or manager of an occupational or personal pension scheme and
- The recipient consents to calls or has an existing relationship with the caller.
Unrealistic offers and promises
Free pension reviews, opportunities to invest your pension with large returns which seem too good to be true and upfront cash incentives cannot always be trusted, so take your time to complete research with trusted sources of information.
Persuasive and time-sensitive sales tactics
Beware of high-pressure sales tactics and time-limited offers, asking you to act quickly (even sending couriers to get your signature). A genuine offer will allow time to seek impartial information or advice.
Unusual investment opportunities
These may involve several parties and complex structures. Investments are often overseas, unregulated and illiquid. These are high in risk to your pension benefits.
Offering early access to your pension
You could pay a very high price for this, including a massive tax bill and fees, and be left with very little in your pension pot. Also known as pension liberation fraud.
Impersonation of firms and ‘government’ schemes
Fraudsters may claim to be authorised by the Financial Conduct Authority (FCA) or say that they don't have to be, as they’re advising you directly. They may impersonate firms or government schemes to try and convince you to transfer your pension. Remember, government schemes will never directly approach you about your pension. Check who you’re dealing with and that they’re authorised and have appropriate permissions if they are providing you with pension-related advice.