Don’t let a scammer enjoy your retirement!
The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) are part of Project Bloom – a multi-agency taskforce which is working to combat pension scams. The taskforce includes the Department for Work and Pensions, HM Treasury, the Serious Fraud Office, City of London Police, the National Fraud Intelligence Bureau, The Pensions Advisory Service (now part of MoneyHelper) and the National Crime Agency.
In August 2018 the FCA and TPR joined forces to launch a new joint ScamSmart pension scams campaign.
Action Fraud launched a national awareness campaign on 25/04/2021 to remind the public about the importance of doing their research before making changes to their pension arrangements.
Find out how pension scams work, how to avoid them and what to do if you suspect a scam
Pension scams can be hard to spot. Scammers can be articulate and financially knowledgeable, with credible websites, testimonials and materials that are hard to distinguish from the real thing.
How pension scams work
Scammers usually contact people out of the blue via phone, email or text, or even advertise online. Scammers will make false claims to gain your trust. For example:
- Claiming they are authorised by the Financial Conduct Authority (FCA) or that they don’t have to be FCA authorised because they aren’t providing the advice themselves.
- Claiming to be acting on the behalf of the FCA or the government service Pension Wise (a service from MoneyHelper).
Legislation to ban pensions cold-calling came into force on 09/01/2019, meaning that companies making unsolicited phone calls to people about their pensions face enforcement action, including fines of up to £500,000. The regulations prohibit cold-calling in relation to pensions, save for circumstances in which the caller is authorised by the FCA, or is the trustee or manager of an occupational or personal pension scheme, and when the individual being contacted consents to the calls, or has an existing relationship with the caller.
You can report nuisance calls and messages to the Information Commissioner’s Office using their online reporting tool or by calling 0303 123 1113.
Scammers design attractive offers to persuade you to transfer your pension pot to them (or to release funds from it). It is often then invested in unusual and high-risk investments like overseas property, renewable energy bonds, forestry, storage units, or simply stolen outright.
Scam offers often include:
- Free pension reviews
- "Too good to be true’’ investment opportunities or higher returns - guarantees they can get you better returns on your pension savings
- Help to release cash from your pension, even though you’re under 55 (an offer to release funds before age 55 is highly likely to be a scam, as it’s normally only in rare circumstances, such as serious ill health, that this is allowed).
- The option to take more than 25% of your pension savings as ‘tax free’ cash. HMRC rules require that all pension savings above 25% are taxable as pension income at a member’s marginal rate, even if they are taken as a lump sum.
- High pressure sales tactics - the scammers may try to pressure you with ‘time limited offers’ or even send a courier to your door to wait while you sign documents.
- Unusual investments - which tend to be unregulated and high risk, and may be difficult to sell if you need access to your money.
- Complicated structures where it isn’t clear where your money will end up
- Long-term pension investments – which mean it could be several years before you realise something is wrong.
4 simple steps to protect yourself from pension scams
Step 1 - Reject unexpected offers
If you’re contacted out of the blue about a pension opportunity, chances are it’s high risk or a scam. If you get a cold call about your pension, the safest thing to do is to hang up. If you get unsolicited offers via email or text you should simply ignore them. Fortunately, most people do reject unsolicited offers – FCA research suggests that 95% of unexpected pension offers are rejected.
Be wary of offers of free pension reviews. Professional advice on pensions is not free – a free offer out of the blue from a company you have not dealt with before is probably a scam.
And don’t be talked into something by someone you know. They could be getting scammed, so check everything yourself.
Step 2 - Check who you’re dealing with
Check the FCA Register - Make sure that anyone offering you advice or other financial services is FCA authorised. If you don’t use an FCA-authorised firm, you also won’t have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) so you’re unlikely to get your money back if things go wrong. If the firm is not on the Register, call the FCA Consumer Helpline on 0800 111 6768 to check the firm is permitted to give pension advice.
Check they are not a clone - A common scam is to pretend to be a genuine FCA authorised firm (called a ‘clone firm’). Always use the contact details on the Register, not the details the firm gives you.
Step 3 - Don’t be rushed or pressured
Take your time to make all the checks you need – even if this means turning down an ‘amazing deal’. Be wary of promised returns that sound too good to be true and don’t be rushed or pressured into making a decision.
Step 4 - Get impartial information or advice
You should seriously consider seeking financial guidance or advice before changing your pension arrangements.
www.moneyhelper.org.uk provide free independent and impartial information and guidance.
Pension Wise (a service from moneyhelper) If you’re over 50 and have a defined contribution pension, Pension Wise offers pre-booked appointments to talk through your retirement options.
Financial advisers
It’s important you make the best decision for your own personal circumstances so you should seriously consider using the services of a financial adviser. If you do opt for an adviser, be sure to use an adviser that is regulated by the FCA and never take advice from the company that contacted you or from someone they recommend, as this may be part of the scam.
If you suspect a scam, report it
Report it to the FCA. You can report an unauthorised firm or scam to them by contacting the Consumer Helpline on 0800 111 6768 or using our reporting form.
Report to Action Fraud. If you suspect a scam you should report it to Action Fraud immediately on 0300 123 2040 or www.actionfraud.police.uk
If you've agreed to transfer your pension and now suspect a scam, contact your pension provider straight away. They may be able to stop a transfer that hasn't taken place yet. If you are unsure of what to do contact The Pensions Advisory Service for help on 0800 011 3797.
If you are taken in by a pension scam and agree to transfer, you will probably lose most, if not all, of your pension savings. You could also receive tax charges of up to 55% of the value of your pension for taking what is classed as an ‘unauthorised payment’ for tax purposes.
If you do receive an ‘unauthorised payment’, you must declare it to HM Revenue & Customs (HMRC). If you fail to declare an unauthorised payment to HMRC, you may be charged penalties in addition to the tax.
Be ScamSmart with your pension
To find out more, visit www.fca.org.uk/scamsmart where you can view pension scam resources including an infographic and TV and radio ads.
In 2021 the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations came into effect.
These regulations mean that new conditions need to be satisfied before members have a statutory right to transfer and schemes are able to prevent or pause a transfer request where they see warning signs of a possible scam.
