How to Spot and Avoid Pension Scams

Everything You Need to Know to Spot and Avoid Pension Fraud

pension scams

How to Avoid Pension Fraud UK

pension scams

Pension scams are on the rise in the UK. With advances in digital communications and the internet, pension fraud is becoming more common and more difficult to identify. That’s why it’s more important than ever to understand how to spot and avoid pension scams.

Pension scams come in many shapes and sizes, but they all have the same devastating effect – you lose your life savings. According to a 2021 report by Action Fraud, victims of pension scams lost over £50,000 each, on average. Fraudsters promise high returns and low risk but, in reality, pension savers are left with nothing.

Don’t let scammers enjoy your well-earned retirement – here’s how to spot and avoid pension scams. In this guide, we’ll help you understand how pension scams work, the warning signs to look out for, and the steps you can take to avoid being scammed.

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What is a Pension Scam?

Anyone with a pension pot can end up falling victim to a pension scam. You don’t have to be retired or even near retirement – pension scammers can target you at any age by tricking you into handing over your life savings.

Although the chances of becoming a target of pension scams are relatively small, frauds are becoming increasingly sophisticated and harder to spot, so it pays to be vigilant.

Since April 2015, you have more choice when it comes to how you access your pension pot. Scammers know this and will try to lure you with promises of upfront cash and one-off ‘deals’ with ‘guaranteed’ high returns.

While pension scams can take many different forms, they all usually appear to be a legitimate investment opportunity. Pension scammers are clever and know all the tricks to get you to hand over your retirement savings.

They might try to persuade you to cash in your pension – either the whole lot or a large sum – and hand the money over to them to invest. Continue reading to find out what warning signs to look out for.

How to Spot a Pension Scam

pension scams

There are some common tell-tale signs to look out for when it comes to fraudsters and pension scams. Knowing what these warning signs are and how to spot them could help you and your loved ones avoid potential pension scams in the future. 

Unsolicited approaches by phone, text, email, or in person

Fraudsters will often contact you out of the blue. This is because they will be trying their luck with whatever information they have managed to get on you. They will then try to convince you to part with all or some of your pension savings. 

Since January 2019, there has been a ban on cold calling about pensions. This means you should not be contacted by any company about your pension, unless you have asked them to contact you. 

A firm doesn’t allow you to call them back

A good way of checking whether a caller is from a genuine company or not is to ask them if you can call them back later. If the answer is no, it’s likely a fraudster. Regulated pension advisers will always allow you to get back in touch as a more convenient time to talk through any questions you might have. 

Poor contact details 

Even if a fraudster does give you details to call them back, that doesn’t always mean they’re genuine. Check if the phone number is a mobile number, or whether the delivery address is a PO Box – if they are, alarm bells should start ringing. 

To be extra safe, we would advise looking up the company on the Financial Conduct Authority (FCA) register. If they are on the register, call them back using that number. If they’re not, don’t make any further contact. 

Told to make quick decisions 

Were you forced into making a quick decision or pressured to do so? The hard sell is a technique used in many types of fraud – and it’s no different with pension scams. You might be pressured into making quick decisions about your money, asked to transfer large sums over the phone or to send paperwork using fast delivery services. 

Making decisions regarding your life savings is a big deal – you shouldn’t have to make them in a split second. If someone wants you to move quickly, they’re not thinking about what’s best for you. Never be rushed into a decision. 

Promises to unlock your pension when you’re under 55

This one’s pretty simple to spot. Most people who choose to draw money out of their pension before age 55 will have to pay 55% tax on the money and a huge fee to the company that arranged it for them. 

The only time you might get your pension early is if you have a serious health problem or you have what’s known as a ‘protected retirement date’. 

Some pension scammers might refer to getting your savings early as ‘pension liberation’ and ‘pension loans’ or ‘selling your pension’. It all means the same thing, and you’ll have to pay a huge tax bill if you do it. 

Offers of high return, low risk schemes

The term ‘high return, low risk’ should be an automatic red flag. You might hear this promise in many other types of money fraud, and it’s always a sign that something isn’t legitimate. 

If you’re being offered very high returns, there is always significant risk. But, in this case, it’s just an empty promise to get you to hand over all your savings. 

Pension tax loopholes and tax savings

Pension tax loopholes are fabricated promises to get you to part with your money. Saving into a pension is already a tax efficient method of saving, so you shouldn’t be eligible for even more tax savings. 

Claiming to be government-backed

You might see companies use certain words and phrases in their name or as part of their marketing spiel, with the aim of making them sound more official, or even supported by the government. 

Some scam organisations will try to associate themselves with legitimate pension companies, like Pension Wise or MoneyHelper, despite having nothing to do with them. Don’t assume that just because they mention a trustworthy, familiar company, that they are legitimate themselves – they’re not. 

How to Avoid Pension Scams

Now you know how to spot pension scams, here’s how to avoid them. Stick to these simple rules to avoid being a victim of pension fraud: 

  • – Reject any unsolicited calls, emails, texts or visitors to your door.

  • – Before transferring any pension, check that the firm you’re dealing with is regulated by the FCA and are authorised to provide pension advice.

  • – Check the firm’s HMRC status. Ask the scheme that you’re transferring from to check the scheme’s HMRC registration status to make sure it’s authorised.

  • – Research the firm’s reputation. Do they have any complaints? Also check on forums and social media for mentions and personal experiences.

  • – Check where the firm’s located and how easy it is to contact them. Is their address a PO BOx or a serviced office? Are they contactable at their registered office? Is it a dedicated landline or a random mobile number?

  • – Don’t try to get your pension before you turn 55, unless you’re seriously ill.

What to Do if You’ve Been a Victim of a Pension Scam

If you think you might have been a victim of a pension scam, you should report it as soon as possible. There is a possibility that you could reclaim your money or even stop others being targeted too.

If the scam was recent, contact your pension provider straightaway. They may be able to interrupt the transfer and stop the fraudster claiming your pension. Once your pension provider knows what happened, they’ll be able to tell you whether you might be able to claim compensation.

You can also call the Financial Crimes and Scams Unit on 0800 015 4402 to see what other help and support is available.

How Do I Report a Pension Scam?

pension scams

In England, Northern Ireland and Wales you should report fraud and cybercrime that has already taken place to Action Fraud. In Scotland, you should call Police Scotland on 101 or Advice Direct Scotland on 0808 164 6000.

It’s important to report a pension scam as it allows authorities to investigate and prosecute scammers. It also enables law and policy makers to get a clearer picture of the effect that scams can have on pensions.

UK Pension Scams

Don’t let pension scammers take advantage of you and your life savings. Hopefully, after reading this article, you have a better understanding of how to spot a pension scam and how to avoid it.

Once you know what warning signs to look for, it can be quite easy to spot pension scams. You just need to remain on the ball and not be conned by the empty promises of these fraudsters.

But remember, if you’re unsure, there is nothing wrong with asking. Contact your pension provider, the FCA, Action Fraud or any other reputable organisation who can give you proper advice regarding your pension pot.

To ensure your pension is as safe as possible, it’s also important that you remember to keep your pension details up to date


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