How to spot a pension scam

Pension scammers and fraudsters typically promise high returns with low risk. And as the old adage goes, if it sounds too good to be true, it probably is.

If you fall victim to a pension scam, the chances are that you’ll lose your entire investment.

However, even if you feel like you’re to blame for falling for a scam, it may still be possible to get at least some of your money back.

Let’s explore how to spot pension scams before it’s too late and what you can do if you fall victim.

How do pension scams work?

It’s easy to feel comfortable and familiar with financial jargon and how things like pensions and investments work. But even the most financially literate person could fall victim to a pension scam.

This is because fraudsters often go to significant trouble to make it seem like they’re running a legitimate operation. For example, pension scammers will usually have:

  • A credible-looking website posing as a digital brochure for a legitimate company.
  • Testimonials on their website, and sometimes even a TrustPilot or page with reviews from “customers.”
  • Marketing materials like leaflets and booklets that they’ll send you.

Some even register a company, so they appear on databases like Companies House if you search for them. The only thing they can’t do is register with the Financial Conduct Authority (FCA). But if you don’t check the FCA register, scammers can get everything else in place they would need to trick you pretty easily.

Once they have this in place, they’ll try and talk you into transferring some, often all, of your pension to their “investment or pension opportunity.” To make the opportunity seem too good to miss, a scammer will usually talk about the returns you can enjoy, making the most of the flexibility to invest your pension funds as you wish and taking advantage of “loopholes” to access your pension early.

While a pension scam might see your savings just flat-out stolen, if the scammers do invest your money, it’ll typically be in high-risk investments and assets, like:

  • Forestry
  • Overseas property and accommodation
  • Parking sites
  • Renewable energy assets, like bonds
  • Storage units
  • Student accommodation

If you fall victim to a pension scam, not only do you risk losing your pension savings, but if the scammer convinces you to withdraw your pension early, it might also land you with a significant tax bill. Of course, the scammers will tell you that you’ll quickly earn the cash to cover the tax bill when you transfer your pension to their scheme.

What are the warning signs of a pension scam?

One of the most common signs of a pension scam is receiving a cold call about transferring your pension or asking if you’d like a “free pension review.”

However, as increasing numbers of people understand that cold calling about pensions is illegal, scammers’ tactics are evolving. Some sophisticated pension frauds even try to use social media to gain access to you and people you know so they can try and trick you into transferring your pension.

Other tell-tale signs that someone might be trying to scam you include:

  • Guaranteeing better returns – even without knowing anything about your existing pension.
  • Talking about accessing your pension early without mentioning the tax penalty and using phrases like “pension liberation.”
  • Putting you under pressure to proceed. This may involve saying the opportunity is a time-limited offer or even extend to sending couriers to your home and asking you to sign documents on the spot. Don’t be rushed into doing anything without first speaking to an adviser.
  • Telling you about the “opportunity” of investing in unregulated investments.
  • The investment they’re trying to sell you having a complex structure.
  • Trying to sell you a fixed-term investment. Scammers love this approach because if you fall for it, it might be years before you realise you’ve been scammed.

How to protect yourself from pension scams

Thankfully, today, safeguards are in place to help you avoid pension scams. For example, new legislation in November 2021 introduced a red and amber flag system, allowing pension providers and trustees to block transfers they suspected of being scams or to the detriment of the pension holder.

However, even with such safeguards in place, which will take care of many of the issues below, it’s worth knowing how to protect yourself and stop scams from happening without even needing to speak to your existing pension provider.

Reject any unsolicited contact

Whether it’s a cold call, an email, a text, a social media message, or even someone knocking on your door, this is a surefire sign someone is trying to scam you.

A legitimate pension provider won’t contact you out of the blue, primarily because they know it’s illegal!

Using apps like TrueCaller on your phone will help you screen calls and automatically block known scammers, making it more difficult for a scammer to contact you in the first place.

Check firms’ and individuals’ FCA status

Okay, so you’ve accepted a cold call or some other form of unsolicited contact about your pension. You’ve listened to what the caller had to say, and some of it sounded pretty attractive.

At this stage, you should check the FCA register to learn if the individual or firm that contacted you is authorised to conduct regulated activities. The FCA also has a warning list of unauthorised and potentially cloned firms. If you find the firm that contacted you on this list, it might not necessarily be a sure sign of a scam, but it is a sign you shouldn’t proceed further.

The FCA’s Scam Smart tool is excellent for identifying whether a pension scammer is trying to trick you.

Check a firm’s HMRC status

Another check you can do is on the HMRC status of the firm that contacted you. Doing this will help you identify if the firm is legitimate and authorised.

Even if a firm passes your FCA and HMRC checks, you should remain diligent – an authorised firm may be aiming to get you to invest in high-risk or unregulated assets.

Google the firm and check the FSCS

Sometimes the best due diligence you can do is the simplest.

If an individual or a firm has given you their name, a quick Google search will often help you find everything you need to know about them. Remember that sophisticated scammers often go to the lengths of creating legitimate-looking websites, so check things like social media and review platforms, too.

It’s also worthwhile checking the Financial Services Compensation Scheme (FSCS) register, which will tell you if your money will be protected in your proposed new scheme.

Check how you’d contact them

Legitimate firms will have an address on their website that matches their registered or correspondence address at Companies House. If an address is a PO Box or a serviced office, this should be a red flag when it comes to transferring your pension.

Look at the firm’s telephone number, too. Is it a legitimate UK number or a mobile? If it appears to be a UK number, what happens when you call? If you get an overseas dial tone, this is a clear warning sign.

If you can’t easily find a firm’s contact details, then the firm is likely not legitimate.

Take heed of any warnings

If your current pension provider or trustees raise red or amber flags about your pension transfer, you should listen to their warnings.

While a lone amber flag, for example, doesn’t necessarily mean you’re risking falling victim to a scam, you should always explore the nature of the warning and delve deeper into what has been proposed.

Even if you decide you wish to proceed, it may be possible for your pension provider or trustees to stop a transfer if they believe it is in your best interests.

Find a financial adviser yourself and get advice

If the person or firm who contacted you claims to be a financial adviser, find your own adviser and discuss your options for your pension pot.

Remember that even if an opportunity is unlikely to be a scam, that doesn’t necessarily mean you should transfer your pension or that doing so would be in your best interests.

What should I do if I think a scammer has approached me?

If a scammer

 approaches you, the good news is that safeguards are in place to stop you from losing your money.

While they should do their job and protect you, it’s also worth:

  • Notifying your existing pension provider of any approach and who it came from. If a transfer appears legitimate and you later start to believe you’re being scammed, your current provider may also be able to stop a pension transfer that is yet to take place.
  • Reporting it via the FCA’s Scam Smart tool.
  • Reporting it to Action Fraud.

If a regulated financial adviser contacts you out of the blue or an unauthorised adviser contacts you about a transfer, you can also report this to the FCA.

How can I get my money back if I’ve fallen victim to a pension scam?

This depends on the circumstances behind your pension transfer.

For example, if you received advice from a regulated adviser or firm, you might be able to bring a mis-selling claim and complain to the Financial Ombudsman Service or the FSCS.

The best thing to do is to speak to a pensions mis-selling specialist who can review your circumstances and help you determine if you have been the victim of a scam and have grounds to bring a compensation claim.

Contact LawPlus Solicitors today for a free, no-obligation review of your pension transfer or advice.

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