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How are individuals targeted by pension scams?

The pensions landscape has changed. Since April 2015, pension scheme members have been able to access their pension savings in new ways.

The tactics used by pension scammers to encourage people to transfer their pension savings to them is constantly changing. Some of the tactics used by pension scammers include offering free pension reviews, health checks and promises of better returns on their savings, pension loans, upfront cash or other promotions to tempt them. Most of these are bogus. Some scammers are also directing members to transfer their pension savings into small (often one or two member) occupational schemes in an attempt to escape scrutiny from regulators.

If the member is under age 55, they cannot release their pension unless they are in ill health. If members are over 55, they can now release funds from their pension. They may still be at risk from scammers. Trustees and administrators should make sure they signpost their members to the Government’s Pension Wise service to understand their options.

Go to the Pension Wise website.

Members with defined benefits should take appropriate independent advice from an FCA-authorised adviser before transferring their benefits from April 2015. You might also want to encourage members with defined contribution benefits to take advice before making any decisions.

Here are some of the most common tactics used by pension scammers to trick savers out of their savings:

  • A cold call, text message, website pop-up or someone coming to their door offering them a ‘free pension review’, ‘one-off investment opportunity’ or ‘legal loophole’.
  • Convincing marketing materials that promise someone returns of over 8% on their investment.
  • Paperwork delivered to their door by courier that requires immediate signature.
  • A proposal to put their money in a single investment. In most circumstances, financial advisers will suggest diversification of assets.
  • They may claim that they can access your pension before age 55.
  • Transfers of their money overseas.

What action are we taking to tackle pension scams?

The Pensions Regulator continues to investigate reports of pension scams and will continue to work with the pensions industry, other government agencies and law enforcement agencies to ensure pension scams are prevented, deterred and disrupted.

Our powers to ensure that members are protected include the:

  • suspension and / or prohibition of trustees
  • appointment of new trustees to schemes
  • issuing of financial penalties
  • freezing and repatriating pension scheme monies

Delaying transfer payments

Where the statutory requirements for a transfer are met, we are not able to waive a trustee’s legal duty to carry out the transfer within the statutory deadline of six months. If in doubt, trustees should seek their own legal advice in determining whether the statutory requirements are met and when the statutory deadline for completing the transfer ends.

We can’t predetermine any future regulatory action we may take. However, where the transferring trustees or administrators can provide evidence for concerns that member funds may be at risk, then this would be a factor to consider when deciding whether to take action in respect of the non-payment of a transfer.

For example, a trustee may obtain evidence when dealing with the transfer request that once the transfer has completed, cash would be passed back to the member before their normal minimum pension age. We take this factor into account when assessing whether it would be appropriate to pursue any action against trustees in relation to a non-payment of a transfer.

It is expected that trustees or managers will be able to demonstrate that they have taken steps to establish the legitimacy of an arrangement where they have delayed making a transfer for that reason. If you’re concerned about processing a transfer request you may wish to seek your own legal advice.

Approved financial advisers

The Financial Conduct Authority (FCA) regulates firms and individuals that provide financial advice. If someone claims to be a financial or pension adviser then members can check with the FCA to make sure they are approved. It’s important that members check this before they act on any pensions advice that they receive.

The FCA also regulates those responsible for operating personal and contract-based stakeholder pension schemes. If you are concerned that a member of your scheme may have been targeted by a scam, then you can check whether the receiving pension arrangement is authorised by the FCA.

To perform these checks go to the FCA register.

Tax-registered pension schemes

HM Revenue and Customs (HMRC) is responsible for administering and collecting taxes. This includes an online registration service for UK pension schemes so that they can receive tax relief on contributions.

The pension tax rules protect the tax relief given on pension savings. These rules are designed to make sure that pension savings are used to produce an income throughout a saver’s retirement. They set out how and when pension savings can be accessed, as well as the tax charges that apply where the conditions are not met. If a member has accessed their funds improperly, ‘unauthorised payment charges’ will apply.

For a checklist of features of a potential scam, including non-registration for tax purposes, see our action pack for trustees and administrators. If a scheme isn’t registered for tax purposes, then do not process a transfer and notify Action Fraud.

Next steps if you have concerns about pension scams

For more information and resources about pension scams – including what to do and who to contact if you have concerns – see the relevant section below:

Trustees, IFAs, pension providers and administrators


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