A pension scam (when someone tries to con you out of your pension money) often starts with someone you don’t know contacting you by phone or text or on social media, about:

·         A new investment or other business opportunity

·         better ways to invest your pension money

·         taking your pension money out before you reach the age of 55

Their aim is to get you to cash in your pension pot and transfer the money so they can get at it.

More than 1.8 million over 50s have been targeted by pension scammers.

Warning Signs

An unsolicited approach by phone, text message, email or in person is likely to be a scam, so just end the conversation. It’s better that you research and decide who to contact and then call them when you’re ready.

There are some characteristics common to many scams, including that they may:-

·         Push you to invest quickly – they might offer you a bonus or discount if you invest before a set date

·         Say that they’re only making the offer available to you or even ask you to not tell anyone else about the opportunity.

·         Offer a guaranteed return. This is not possible in an uncertain world.

·         Offer a free review – no regulated adviser, pension provider or government agency will contact you to offer you a free review. Even if they have your pension details, ignore them.

·         Claim the deal is low or zero risk.

·         Promise returns that sound too good to be true, such as better interest rates than everybody else

·         Give you contact details that are only mobile phone numbers or a PO box address.

·         Not allow to call them back.

·         Claim they can help you or a relative unlock a pension before the age of 55, sometimes known as ‘pension liberation’ or ‘pension loans’. This is contrary to HMRC rules and only in very rare case, such as very poor health or specific industries is this possible.

·         Say they know of tax loopholes or promise extra tax savings.

·         Offer investments in unusual assets such as diamonds or parking spaces.

·         Claim to from a government organisation.

How to Check a Caller

1.       Check the FCA website (www.fca.org.uk) to determine of the caller is FCA registered. Almost all financial services firms must be authorised by FCA – if they’re not, it’s probably a scam.

2.       Check if the firm’s ‘firm reference number’ and contact details are the same as on the Register.

3.       If you’re dealing with an overseas firm, you should check with the regulator in that country and also check the scam warnings from foreign regulators.

4.       Check the firm’s details with Companies House (www.gov.uk/government/organisations/companies-house) to make sure they match.

If you use an unauthorised firm, you won’t have access to the Financial Ombudsman Service (www.financial-ombudsman.org.uk) or Financial Services Compensation Scheme if things go wrong – and you’re unlikely to get your money back.

Financial Advice

Always get independent advice before investing – don’t use an adviser from the firm that contacted you.

The Money Advice Service run by the Government (www.moneyadviceservice.org.uk) has information on how to find a financial adviser and a lot of information about pension schemes.

Double Scams

If you’ve already been scammed, fraudsters are likely to target you again or sell your details to other criminals.  The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the scam investment after you pay a fee.

Pension Liberation

Pension liberation schemes are plans which claim to allow people access to the money in their pension fund before they reach age 55.

This is not within HMRC (www.gov.uk/government/organisations/hm-revenue-customs) rules which only allow access before this age in very specific circumstances. These apply to specific professions, which allowed an early normal retirement age prior to 6 April 2006 and to those too ill to continue their occupation.

The HM Revenue & Customs website highlights the tax consequences of pension liberation to individuals.

Pension liberation schemes share some common features:

·         They solicit business via direct advertising or cold calls.

·         They require the client to instigate a transfer to a new pension plan, which may be overseas.

·         The receiving plan has only been in existence for a few months.

·         The companies related to the receiving scheme have only been in existence for a few months.

·         The investment is usually in overseas property e.g. a hotel or seafront properties.

·         The investment has a high and guaranteed rate of return.

They can also be expensive - the management charge for releasing the payment may well be up to 30% of the fund value prior to the payment.

Also, the payment itself is an unauthorised payment and will result in a tax charge of 55% which the individual is personally liable for.

Government Action

The government is seeking ways to restrict pension scam activities. There are the education campaigns such as the FCA’s ScamSmart and The Pension Regulator’s Scorpion (a consultation about measures to stop scammers).

New proposals under consideration include banning cold calls; giving more powers to pension companies to block suspicious transfers; and making it harder for scammers to set up fraudulent pension schemes.


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