Protecting your pension from scams


Is your pension at risk from fraudsters? You probably think the answer is ‘no’ and that you wouldn’t fall for scams. However, the reality suggests that sophisticated financial fraud is more difficult to recognise that you might think at first.

Looking at financial fraud overall, one in ten adults say they have fallen for some sort of scam, the equivalent of five million Brits, according to research from Lloyds Bank. Despite the figures suggesting that financial scams are rife, 77% think they keep up with potential risks and four in five says they feel confident that they would be able to spot a scam. However, the number of people being affected by fraud suggests that it can be hard to spot, even for those that are cautious.

Paul Davis, Fraud and Financial Crime Director at Lloyds Bank, said: “We are a vigilant nation, yet it is clear from our research that many of us do still get caught out when it comes to scams. Fraudsters have adapted to changing technology by using ever more sophisticated tactics, making them more difficult to spot.”

Pension risk

It’s easy to see why pensions are often attractive to fraudsters. They are likely to be one of the largest assets you have, making the prize for duping you better for criminals.

The latest figures from XPS Pensions Group show the number of ‘red flags’ being reported on pension transfers, indicating that scam activity could be taking place, increased from 13% in June 2018 to 34% in June 2019. This represents £73 million of pension savings at risk over the last year. Of course, it’s important to remember that not all of these red flags will turn out to be scams, part of the risk can be attributed to a better warning system, but it does highlight the need to be vigilant.

Previous figures from the Financial Conduct Authority (FCA) show how devastating pension fraud can be for victims. In 2017, the average victim lost £91,000, potentially putting their retirement plans and future financial security at serious risk. Losing your life savings at a point in your life where you’re hoping to start accessing them and take a step back from employment can mean having to rethink a lifestyle you’ve been looking forward to.

What can you do to protect your pension?

Anyone can be targeted by fraudsters and with the value of pensions rising, it’s important to understand the risks and how to spot a scam.

1. Keep an eye out for buzzwords: Fraudsters will try to entice you into making a quick decision and will often use phrases such as ‘free pension review’ to draw you in. Keeping an eye out for this type of language can alert you to the fact you’re speaking to someone trying to scam you.

2. Note high-pressure sales tactics: Any pension decision is a big one that should be carefully thought about. Genuine pension advisers will understand this and give you the time to think before proceeding. Fraudsters, on the other hand, will want you to make a snap decision where you haven’t had time to fully comprehend the consequences.

3. Don’t respond to cold-calling: Most fraudulent activity starts with cold-calling. However, this has been banned since the beginning of the year. Reputable advisers will not contact you in this way. Whilst cold-calling is often associated with phone calls, it could also be through text message, emails and social media.

4. Check the FCA register: The FCA register is a tool that can allow you to verify who you’re speaking to and their credentials. Checking it is a simple step that could save you money. However, be aware of number spoofing, which allows criminals to appear as though they’re calling you from another number, including those linked to genuine firms. As a result, you should always call back on the number listed with the FCA.

5. Be cautious of unusual investments: When propositioning you about investment opportunities, fraudsters may mention unusual investment options, often stating they are high return, low risk. Make sure you fully understand how your money would be invested and the potential risks of any investment before proceeding, particularly when it comes to your pension.

6. Remember returns cannot be guaranteed: It’s natural to want to protect your pension and retirement income. But investment returns cannot be guaranteed, and you should be wary of anyone who claims to be able to do so.

7. Know the rules around accessing a pension: At the moment you can access your pension from the age of 55, rising to 57 in 2028. However, fraudsters may suggest they can help you do so before this age. This is only possible in rare circumstances, such as a terminal illness, and can be done directly through your pension provider.

Above all, remember that if an offer sounds too good to be true, it probably is. Whether you’ve received a suspicious offer relating to your pension or simply want to understand where your retirement finances stand, please contact us.