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Planning for retirement should give you peace of mind – but unfortunately, pension-related scams are becoming increasingly sophisticated, targeting savers of all ages and income levels.
The Financial Conduct Authority (FCA) said almost 800,000 people reported losing money to investment or pension-related scams in the 12 months to May 2024.
Fraudsters often disguise themselves as trusted advisors, official institutions or legitimate investment opportunities, making it harder than ever to tell the difference between genuine guidance and expensive traps.
We spoke to solicitor and managing director Anthony Wilson abundant lawWho has represented numerous victims of pension fraud. They highlight what these scams often look like and what dangers to watch out for.
What are some common types of pension scams?
“All the victims seem to have a similar origin in terms of how they’re actually approached,” Wilson says. “These scams usually begin through some type of unsolicited call, text or social media contact.”
The lawyer also highlighted that most pension-related scams appear to follow one of the following three scenarios.
“Many people are either offered a free pension review, persuaded to transfer money into investments or persuaded to release tax-free cash from their pension,” says Wilson.
Many of these scams are very sophisticated.
“With the sophistication of social media and algorithms, scammers can target ads to a very specific group of people,” says Wilson. “So, you find that these people are actually very clever at targeting particular age groups who may be tempted to free up their pensions.”
He also said that scammers often use middlemen to appear more legitimate.
“What often happens is that they use all kinds of intermediaries and the way they draft the document is exceptionally clever, so clients will believe that they are actually dealing with a company that has some sort of connection with the UK,” says Wilson. “Then when they find out their pension is gone, they can’t even make a claim on the Lifeboat Scheme, which is the Financial Services Compensation Scheme in the United Kingdom, because the scheme and the company are often not covered by the Financial Conduct Authority.”
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Who is usually targeted and why?
“In terms of target group, I think the average age of my customers over the years has been between 45 and about 65,” says Wilson. “A lot of the older group commonly fall prey to scams that ask victims to take tax-free cash from their pension, because if you are over the age of 55 you are entitled to take a certain percentage of your pension, in essence, tax-free.
“However, young individuals are led to believe that the returns are going to be extraordinary. These victims are often tricked into thinking that pension money is being “wasted” just sitting there doing nothing and the scammers convince them to transfer it to this self-invested individual pension scheme.”
What common red flags to pay attention to?
1. Unsolicited Contact
“The Internet is an ideal marketplace for people to conduct all kinds of scams, and these pension scams start in the traditional way, through some kind of unsolicited social media contact, text or phonecall,” says Wilson.
2. Time pressure
A common tactic is to force you to work quickly.
“There’s always a kind of time pressure felt during negotiations,” Wilson highlights. “The scammer usually adopts a common sales strategy of a time-restricted offer and will say ‘this is time-limited’ or ‘I am only available right now so you need to complete the documentation quickly as this opportunity will close soon’.”
3. Any investment opportunity outside the UK
“If it involves a foreign matter, you need to be very, very careful,” Wilson warns. “Many scammers will try to persuade you to invest in overseas property and their emphasis is based on getting you out of all the restrictions that apply in the United Kingdom.”
4. Underestimating risks and losses
If it sounds too good to be true, it probably is.
“Scammers will often try to persuade you to transfer your pension funds to something more attractive,” Wilson highlights. “They will say it will be much better for you, it will make you more money and you will have more control over it.
“When people raise all kinds of issues and questions, the scammer will often downplay the risks and exaggerate the positives, rewards and returns.”
How can people protect themselves?
do not respond
“If you get an unprompted text or social media message, the advice I would give is try not to entertain it and not respond,” advises Wilson.
be cautious
“Treat all calls with caution and never assume they are genuine,” Wilson advises.
Try not to share personal information online
“There are a lot of data lists that these scam companies have floating around, so they usually know a little bit about you,” says Wilson. “So, be aware of how much information you are putting out there and never give out your bank account or credit card details.”
pause and reflect
“Try not to act quickly, [instead] Stop and recheck,” Wilson advises. “If it’s a genuine situation, business or pension company, they won’t mind at all if you want support or time to think about it.”
Check FCA website
“Check the FCA website to see if they are a legitimate company/business on the regulator’s various registers,” advises Wilson.
FCA has also just launched a new firm checker tool Check on their website to check if a firm is authorized and has the right permission to provide services to help people reduce the chances of becoming a victim of fraud.
In addition to checking whether a financial services firm is authorized by the FCA for the services being offered, the FCA advises people to confirm that contact details match those listed on the FCA Firm Checker.
What should you do if you fall into a pension scam?
“Always go to a regulator like the FCA first and see if you can identify whether the scammer’s company is a going concern or is in default and see if they are listed on the FCA’s registers,” advises Wilson. “Then see if you can make your complaint through various channels such as Financial Ombudsman Service Or the Pensions Ombudsman Service and if you can’t, get legal advice.”