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Avoid pension scams

Don’t let scammers enjoy a pension saver’s retirement. Find out how pension scams work, the warning signs, and the steps you can take to help pension savers avoid being scammed.

Fraudsters promise high returns and low risk, but in reality, pension savers that are scammed can be left with nothing.

When savers realise they’ve been scammed, it can be devastating – many lose their life savings. Once the money is gone, it’s almost impossible to get it back.

You can help pension savers avoid falling victim to a scam.

If you’re a trustee, scheme administrator, business adviser or employer, find out how you can beat pension scams and help savers be ScamSmart.

How pension scams work

Anyone can be the victim of a pension scam, no matter how savvy they think they are. It’s important that everyone can spot the warning signs.

Scammers try to persuade pension savers to transfer their entire pension savings, or to release funds from it, by making attractive-sounding promises they have no intention of keeping.

The pension money is often invested in unusual, high risk investments like:

  • overseas property and hotels
  • renewable energy bonds
  • forestry
  • parking
  • storage units

Or it can be simply stolen outright.

Read our booklet on how to spot a scam (PDF, 122kb, 2 pages).

Many scammers persuade savers to transfer their money into single member occupational schemes, or other occupational pension schemes.

Savers could lose all their money and face a high tax bill from HM Revenue and Customs (HMRC) if they withdraw their pension savings before the age of 55.

Direct savers to the government’s Pension Wise service to understand their options.

All pension savers should speak to an independent FCA-authorised adviser before making a transfer, and in some cases are required to do so.

Warning signs of a pension scam

Scammers often cold call people via phone, email or text – this is illegal, and a likely sign of a scam. They often advertise online and can have websites that look official or government-backed.

Other common signs of pension scams:

  • phrases like ‘free pension review’, ‘pension liberation’, 'loan’, ‘loophole’, ‘savings advance’, ‘one-off investment’, ‘cashback’
  • higher returns – guarantees they can get better returns on pension savings
  • help to release cash from a pension before the age of 55, with no mention of the HMRC tax bill that can arise
  • high pressure sales tactics – time limited offers to get the best deal; using couriers to send documents, who wait until they’re signed
  • unusual high risk investments, which tend to be overseas, unregulated, with no consumer protections
  • complicated investment structures
  • long-term pension investments – which often mean people who transfer in do not realise something is wrong for a number of years

Trustees and administrators

Trustees and administrators play an important role in educating and protecting members.

Help savers keep their retirement savings away from scammers.

How you can help

Scheme transfers and carrying out due diligence

If a saver asks for a scheme transfer, use our checklist (PDF, 199kb, 3 pages) to find out more about the receiving scheme. You can also incorporate messages from our template letter (DOC, 26kb, 1 page) to be sent to savers who request a transfer.

The Pension Scams Industry Group, which is made up of bodies from across the pensions industry, provides a due diligence code of good practice.

If you’ve carried out due diligence and suspect a receiving scheme may be involved in a scam:

  • tell the member your suspicions
  • record this communication, along with any decisions they make
  • report your concern to Action Fraud

We can’t predetermine any future regulatory action we may take if a requested payment isn’t made. However, where transferring trustees or administrators show evidence of concerns that saver funds may be at risk, we would consider this when deciding whether to take action due to the non-payment of a transfer.

Timing of transfers

If the legislative requirements or scheme rules are met, trustees still have a legal duty to carry out a transfer before the statutory six-month deadline. We expect most transfer requests to be completed in this time.

If the trustees of a transferring scheme need more time to carry out due diligence, they can apply for an extension.

An extension may be granted when:

  • the saver hasn’t taken all steps needed to carry out the transfer
  • trustees haven’t been provided with information they reasonably require to properly carry out the saver’s request

The application for an extension must be made before the six-month deadline. It should:

  • identify the basis for the extension request
  • state the extra time needed to make the transfer
  • explain why the transfer can’t be completed on time

Where trustees suspect a pension scam, they should consider applying for an extension as soon as due diligence raises concerns and the extension criteria are met.

Savers who have been scammed

If you find out a pension saver has been scammed, encourage them to report it to the Financial Conduct Authority (FCA).

The Pensions Advisory Service (TPAS) supports people that want to rebuild their pension savings. To book an appointment, email virtual.appointments@pensionsadvisoryservice.org.uk

Approved financial advisers

The FCA regulates firms and individuals that provide financial advice.

Pension scammers sometimes pose as financial advisers; have smart-looking brochures and websites giving scam warnings, pretending to be official or government-backed. 

Professional appearances don’t guarantee that a company can be trusted. Savers should check with the FCA to make sure a firm is authorised before acting on any pensions advice they’re given.

It’s important that savers stay alert to other warning signs of a scam. Share our template news story (DOC, 209kb, 2 pages) with savers so they know how to spot them.

The FCA also regulates those who operate self-invested personal pensions (SIPPs) – personal and contract-based stakeholder pension schemes. If you’re worried that a member of your scheme may have been targeted by a scam, check if the receiving pension provider is authorised by the FCA.

If you have concerns about a firm that’s listed on this register, contact firm.queries@fca.org.uk.

The Financial Services Compensation Scheme (FSCS) protects consumers who receive bad or negligent advice from a financial adviser who is authorised by the FCA. The FSCS can pay up to £50,000 per claim.

Tax-registered pension schemes

HMRC provides tax relief given to pension savings in registered pension schemes. Pension scams put this tax relief at risk.

All applications to register a pension scheme undergo checks by HMRC, who monitor activity during the life of a registered pension scheme.

If HMRC doesn’t believe a new scheme is genuine – or doesn’t believe the scheme administrator is a fit and proper person to perform the role – the scheme won’t be registered.

If a pension scheme hasn’t complied with its tax obligations, HMRC can impose sanctions. This can include de-registering the scheme, so it doesn’t benefit from tax advantages.

If a scheme administrator has carried out due diligence checks on a transfer, but still has concerns, they can request confirmation of the registration status of the receiving scheme from HMRC by writing to: Pension Schemes Services, HMRC, FitzRoy House, Castle Meadow Road, Nottingham, NG2 1BD.

Business advisers

You’re the first line of defence for your clients against pension scams – they’ll look to you for advice.

Scammers can be articulate and financially knowledgeable, making it difficult to tell between them and legitimate advisers.

Get to know your responsibilities as a professional adviser and help your clients spot the warning signs of a pension scam.

How you can help

Get to know your responsibilities

Employers

Your staff look to you for support – your help can keep them away from pension scams.

Scams victims lose £91,000 on average from their pension, often their life savings.

Get to know your responsibilities – help your staff be ScamSmart and keep their retirement savings safe.

How you can help

Four steps for savers to prevent pension scams

  1. reject unexpected pension offers, whether in person, over the phone, online, or through social media
  2. check who you’re dealing with before changing your pension arrangements – visit ScamSmart or call the FCA on 0800 111 6768 to see if the firm is authorised
  3. don’t be rushed or pressured into making any decision about your pension
  4. consider getting impartial information and advice

Get to know your responsibilities

Are you a pension saver?

Don’t let a scammer enjoy your retirement. Be ScamSmart and visit fca.org.uk/scamsmart to find out more.

If you suspect a scam, report it to Action Fraud – the UK's national fraud and cybercrime reporting centre.

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