7 common pension scams to look out for

Pension scams are on the rise and fraudsters are becoming more inventive.

Pension scams are on the rise. A survey by pension provider Scottish Widows found 18% of men had been targeted at least once by scammers. The figure was lower among women, at 7%. Overall, 28% of savers are anxious about falling victim to fraud.  

Scottish Widows’ research follows analysis by The Pensions Regulator (TPR), a watchdog responsible for policing parts of the pension industry. It said it had identified seven separate types of scam, variations of which are now commonly pursued by fraudsters.  

7 pension scams to look out for 

Investment fraud 

TPR’s list of scams begins with cases of investment fraud.  

This involves scammers persuading savers to transfer their pension funds into risky or false investments with the promise of high or guaranteed returns. These can include overseas property, parking garages, and storage units. 

These assets are typically unregulated and likely to fail. In some cases they don’t even exist.  

Pension-liberation schemes 

Pension-liberation schemes are also common. Fraudsters will target people worried about the cost of living crisis who are looking to tap into cash they have previously saved in a pension. 

Regulation makes it almost impossible for savers to access such cash until they reach age 55, unless they are prepared to hand over more than half the money in tax penalties.  

Scammers claim to have identified loopholes to get around the rules. Not only are their claims false, but the scammers often take charges of 30% or more. 

Fake pension schemes and pension providers 

Some fraudsters go as far as setting up bogus pension schemes and pension providers. These arrangements typically promise better returns than existing pension schemes, and are often associated with high-pressure sales tactics. Fraudsters then walk away with savers’ cash.  

Clone firms  

These are fake companies set up with names and registration data that deliberately mimic those of legitimate businesses. The Financial Conduct Authority maintains a growing list of clone firms. 

Cold calls from pension companies 

If you ever receive an unsolicited call from a pension company, hang up the phone immediately. The practice of making cold calls about pensions is now illegal, so any firms trying to sell this way are breaking the law. 

Employer-related scams 

These may be more difficult to detect. They typically involve cases where employers divert employees’ pension contributions to invest inappropriately in their businesses. If you have any concerns about how your employer runs its occupational pension scheme – if it does not publish independently audited accounts, say – contact TPR. 

Complicated business structures 

Fraudsters might contact you to tell you about a complicated business structure, often with multiple layers, that ultimately result in you paying exorbitant charges.  

All savers should keep a close eye on the fees they pay, but these fraudulent structures are set up to extract eye-watering amounts from you. There are even scams targeting people who have already been cheated, with fraudsters promising to go after lost cash in return for additional high charges.  

How to avoid pension scams 

These scams are outright frauds, but TPR also wants savers to be on their guard against practices that might not be illegal, but which would still cause them harm.  

“It’s vital that you keep up to date with current and evolving scam tactics and get to know the signs of a scam,” says TPR. Watch out for buzzwords such as pension liberation, loan, loophole, savings advance, one-off investments and cashback as well as guarantees on better returns.  

High pressure sales tactics, where scammers trick you into thinking an offer is time limited, are also a giveaway.  

Anyone promising to release your pension before your retirement age without mentioning the tax bill should also not be trusted. 

Watch out for high-risk investments and complicated investment structures, as well as fixed-term pension investments.  

How to report a scam 

You should report a scam to the authorities if you believe a scam has already happened, if a red flag is raised while making a transfer, or if you suspect a pension scam could be taking place.  

You can report fraud, cyber crime and concerns to Action Fraud online or by phone. You can also get in touch with the Financial Conduct Authority and The Pensions Regulator. 

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