Pension Scams - What to look out for
Thu 01 Oct 2020
There has been a rapid increase in different forms of financial scams over recent years. As people contribute to their pensions over many years, they will often have built up a considerable amount of money. Therefore, pensions are often targeted by scammers.
If a person is targeted by a pension scam, they can find themselves losing their entire pension but also having to pay a large tax bill to HMRC. Since people now have more flexibility to withdraw their pensions as a lump sum instead of having to generate an income in retirement, it has become an easier target for scammers.
There are different signs you should look out for to try to avoid falling victim to a pension scam. Scams can be hard to identify but here are a few indicators:
Possible scam indicators:
- You receive unexpected contact such as cold call. Scammers may also make initial contact with their victims via email, social media, post or word of mouth.
- You are under pressure from the scammer to get the transfer done quickly and they may push you to invest there and then. They may use phrases like ‘there is only a limited time’.
- You may be subject to further pressure by them offering to send a courier to get the documents signed, this is not something a regulated financial adviser would do.
- The return they promise you seems unrealistic (if it seems too good to be true then unfortunately it probably is).
- They may try to build a friendship with you or become overly friendly and use flattery.
- They may use phrases such as you can take advantage of a loophole or they promise you cashback or access before 55 with no mention of tax.
- You may be offered a transfer to an overseas account, having an investment based overseas works well for scammers as it is more difficult for would-be investors to prove that it exists.
You will usually be offered a transfer to a single investment. Any regulated financial adviser is not likely to do this as having only one investment can expose the investor to unnecessary risk if the one fund performs badly, they can lose all their money. More commonly an individual’s investment will be invested across several types of investments to spread the risk and holds the best chance at a better return.
Here are some useful websites which you can use to find further information on pension scams:
Who to report a pension scam to:
Scams should be reported to Action Fraud: https://www.actionfraud.police.uk/ Tel: 0300 123 2040
Type of article: Articles
Category: Saving my money
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