Pension scams are on the rise – what should you look out for?

By HarperLees

It’s been a difficult few years for savers, with the cost of living crisis leaving many Brits worried about whether they will have enough money during retirement.

Indeed, a study by Aviva has revealed that around 71% of UK adults are worried about not being able to afford to do all the things they want to do in the years to come.

With that in mind, many households are looking at ways they can protect their wealth and boost their retirement income.

As a result, the Pensions Regulator has warned that savers might be at higher risk of being targeted by pension scams.

So, if you’re approaching retirement or are worried about your pension, it’s important to know exactly what to spot if fraudsters are targeting you.

With that in mind, here are four pension scams to watch out for so that you can keep your money safe.

1. Pension liberation

“Pension liberation” is one of the most common types of pension scam.

Typically, you can access your defined contribution (DC) pension after you turn 55 – this will rise to 57 in 2028.

However, fraudsters will often target individuals claiming they can help them release their pension cash early. This will often come with high fees of up to 30% of the withdrawal.

The scammers may attempt to contact you through mass texting, cold-calls, or websites offering pension loans or opportunities to cash in your pension.

Accessing your pension before the required age can result in significant tax charges, so be wary of anyone claiming otherwise. Call your pension provider directly if you ever receive a proposal for pension liberation.

2. Free pension reviews

Another common scam used by fraudsters is the “free pension review”.

Scammers often use the free review to advise you to liberate your pension early or invest your savings in high-risk funds that they promise will deliver high returns.

This type of pension scam is popular with fraudsters because it can be easily confused with legitimate free appointments offered by MoneyHelper. This service, backed by the government, offers free and impartial pension advice to the over-50s and explain how to take money from any pension pots.

It’s important to note that the government banned pensions cold-calling in 2019. So, if you receive a phone call from someone trying to discuss your pension with you, it’s highly likely it’s a scam.

Moreover, genuine pension providers or advisers will never call you out of the blue or object to you calling them back on a number that you trust.

3. Clone firm scams

The Financial Conduct Authority (FCA) has warned of a huge rise in “clone firm” scams in recent years.

Fraudsters will set up these firms by using the name, address and firm reference number of real companies authorised by the FCA.

They may even make a replica of any websites belonging to reputable and genuine companies.

Scammers like these often use high-pressure tactics to get you to transfer your savings to this seemingly legitimate company or promote limited-time transfer offers.

If you are unsure about the legitimacy of the person contacting you, visit the FCA’s warning list of known unauthorised or clone firms. It may also be worth calling the company the scammer claims to be from to check the authenticity of the contact.

4. Claims management companies

While there are some legitimate claims management companies (CMC) regulated by the FCA, scammers will occasionally pretend to be calling from a CMC and claim you have been mis-sold a pension.

They will often tell you to pay a fee upfront so that they can begin an investigation to help you get your money back. However, they’ll take this fee and that will be the end of their contact with you.

If you receive a phone call from a CMC, check the regulation credentials of the firm on the FCA services register.

It’s important to be aware that, if you are the victim of a pension scam, it’s unlikely that you will be able to get any of your money back. So, be sure to report any approach to Action Fraud and the police.

If you receive any calls or texts out of the blue that ask to discuss the scam, it’s important to be very wary.

Get in touch

Losing some or all of your pension savings can be a traumatic experience. Fraudsters are using ever more sophisticated techniques to part you from your savings, so it’s important to be vigilant.

If you’re unsure about an opportunity you have been offered, or you’d like to double check that a pension review or offer is genuine, get in touch with us.

Please email or call 01277 350560.

Please note

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.