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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.

How pension scams work

Anyone can be the victim of a pension scam, no matter how financially 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 the TPR booklet on how to spot a scam (PDF, 122kb, 2 pages).

Many scammers can also persuade savers to transfer their money into Small Self Administered Schemes (SSAS).

Scammers will sometimes promise savers early access to their pension pot through loans or 'loopholes'. 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.

Savers can use Money Helper to understand their options.

All pension savers should speak to an Independent Adviser authorised by the Financial Conduct Authority (FCA) before making a transfer. In some cases they are required to do so.

Warning signs of a pension scam

Cold calling about pensions is illegal and a likely sign of a scam. Cold calls used to be scammers' most common method of approach. But since the cold-call ban was introduced in 2019 their tactics have evolved. Some have moved to sophisticated online models, making contact through social media, or will use friends and family to reach clusters of people. Others will rely on established practices like offering a free pensions review.

It's vital that you keep up to date with current and evolving scam tactics and get to know the signs of a scam.

Other common signs of pension scams:

•  Phrases like ‘free pension review’, ‘pension liberation’, 'loan’, ‘loophole’, ‘savings advance’, ‘one-off investment’, ‘cashback’
•  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 several years

Report a scam

In England, Northern Ireland and Wales you should report fraud and cybercrime that has already happened to Action Fraud.
In Scotland, you should call Police Scotland on 101 or Advice Direct Scotland on 0808 164 6000.

Reporting scams allows authorities to investigate and prosecute scammers. It also allows law and policy makers to get a clearer picture of the effect that scams have on pensions.
If you’re concerned about a potential scam you should report your suspicions to Action Fraud (in Scotland: Police Scotland or Advice Direct Scotland) or the Financial Conduct Authority. You can also report any intelligence or concerns by contacting us.

MoneyHelper supports people that want to rebuild their pension savings. To book an appointment, email virtual.appointments@moneyhelper.org.uk.

Trustees and administrators

Trustees, administrators and scheme providers play an important role in educating and protecting members.
We can help the fight against pensions scams by:

Communicating the risks of scams to Member Trustees

We provide ‘risk of scams’ warnings in the following:

⦁ Annual account statements
⦁ Transfer packs
⦁ Our website

Cash drawdown requests

We believe that Member Trustees seeking tax free cash drawdowns should seek appropriate help and guidance from services such as MoneyHelper.
Warning signs and best practice for transfers

Our Transfer staff have:

⦁ Completed the scams module in the Trustee Toolkit and are regularly updated with news from industry scams events and webinars

⦁ Undertake appropriate due diligence in relation to pension transfers, including:
      ⦁ Ensuring that any member undertaking a transfer of more than £30,000 from a defined benefit scheme takes regulated advice
      ⦁ Checking the FCA warning list where there is any concern about a transfer
      ⦁ Maintaining a list of questions to help identify vulnerable customers and keep records of those who may be vulnerable

  ⦁ Communicate with members, by calling or writing when initial analysis has raised concern in areas where transfers to a Members Scheme indicates a risk such as:
         ⦁ The nature of the member contact.
         ⦁ If unregulated introducers and individuals of concern have been involved
         ⦁ The nature of the investments, if they are high risk or unregulated, and the member’s understanding of how the funds will be invested on their behalf
         ⦁ The level of fees being charged, what the members understand of these charges and whether any valuable guarantees will be lost on transfer

We believe best practice is to call the member to confirm their understanding of the transfer and to make them aware of the concerns.

Communicating concerns about high-risk transfers

We clearly warn members who insist on high-risk transfers being paid by writing and calling to make them aware of our concerns.

Reporting concerns about scams to the authorities

We report any concerns about a scam to the authorities and communicate this to the Member Trustees by:

⦁ Encouraging Member Trustees to report the scam or suspected scam to Action Fraud or 101 in Scotland
⦁ Directing Member Trustees to the FCA’s website ⦁ FCA-SCAM-ALERT to report suspicions about a pension transfer
⦁ Reporting any intelligence or concerns to TPR

Further Action by Empowered Trustees

What Empowered Trustees will not do

As Corporate Trustee Empowered Trustees are very aware of our responsibilities to prevent unauthorised payments and will take an active role in preventing “pension liberation” and combating Pension Scams. To assist in meeting this challenge:

Empowered Trustees will not:
⦁ Allow access to pension fund benefits other than as prescribed by Legislation
⦁ Facilitate investments that have Pension Liberation / Pension Scam hall marks
⦁ Facilitate overseas investments
⦁ Facilitate any investment brokered or introduced by an Adviser not regulated by the FCA
⦁ Accept any form of inducement from any investment provider, agent or intermediary

Approved financial advisers

The FCA regulates firms and individuals that provide financial advice.

Pension scammers sometimes pose as financial advisers. They may 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 given.

The FCA also regulates those who operate self-invested personal pensions (SIPPs), and 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 the FCA 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 £85,000 per claim.

Overseas advisers and investments are unlikely to be covered by the FSCS.

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 new pension scheme undergo checks by HMRC, which monitors 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,
NG2 1BD.

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