How to spot a pension scam

The free pension review

This is one of the most popular scams and one of the most successful due to the beneficial and harmless sounding nature of their offering. Customers are contacted on the doorstep, by telephone, text or email and are offered a free pension review. This, of course, isn't a review at all…

The one-off investment opportunity

The last few years have been relatively poor for savers, with interest rates remaining low. Everyone wants to maximise their pension pot and it is this desire upon which this scam relies.

The pension liberation scam

This type of scam typically targets those savers under the age of 55 and is also known as a pension loan, early pension release or simply cashing in your pension early. Unlike the other scams, pension liberation is completely legal but is almost certainly never a good idea.

On the doorstep

The most direct method where you will open the door to be confronted by someone offering to review your pension arrangements in the comfort of your own home. Very often they will have very convincing identification and will be smartly dressed with authentic looking documentation.

By telephone

The most common method of communication - but cold calling about pension schemes has now been banned. If you've ever failed to tick or untick the correct box on a form to state that you do not wish to be contacted by third parties, your data could have been bought by any number of companies, both reputable and not so reputable. You may be told they are calling from your current pension provider or that they are calling from some sort of official body.

By text

As mentioned, you may have inadvertently let your telephone number fall into the hands of scammers. You may receive a text offering a free pension review and, if you reply, you may then be called by one of the fraudsters.

What is the scam?

The scam is to 'review' your pension and then make claims that try to take your funds away from you. Of course, it isn't a review at all, and you will be encouraged to move your pension pot into a 'more lucrative investment vehicle' with the promise of high returns and/or greater safety for your money.

On the doorstep

With a smart appearance and with convincing identification and information, the one-off investment opportunity is a scam that relies on high pressure sales tactics, so is particularly suited to door-to-door prospecting.

By telephone

Cold-calling about pensions in the UK has been illegal since January 2019. If you receive a call about your pension from an organisation you don't know, it is safe to assume that it is a scam. Fraudsters will always have ways and means to get hold of telephone numbers, so do not assume that, because you always tick or untick the box that says you do not want your number passed on, any call you receive is always genuine. There are numerous unscrupulous companies willing to pass on your details regardless of whether they have your permission or not. You may be called numerous times by the fraudsters who will use high pressure sales tactics.

By text

You may be contacted by text and, should you reply, this will open the doors for them to bombard you with calls to try and relieve you of your pension.

What is the scam?

Over the past few years, many people have seen poor returns from their pension investments, due to the global financial crunch and other factors that have resulted in poor growth for many pension pots. In this scam, fraudsters talk up the poor growth of many pension investments whilst encouraging you to transfer your pension pot into a more lucrative investment vehicle. The returns are often said to be 'guaranteed' and are way above the level of growth almost any other investment can offer.

These investments are often based overseas and are almost certainly not regulated in any way. The worst case scenario is that you will lose your entire pension pot because the investment does not actually exist. The best case scenario is that the investment vehicle does exist but you will almost certainly not get anywhere like the returns promised. In fact, you will probably get less than if you had left it in your original pension pot, as it may be poorly managed and will almost certainly have excessive fees and charges.

On the doorstep

This is not generally the way that most pension liberation companies will contact people, as there are far more targeted and effective methods that they can use. However, you should still always remain extremely wary of anyone selling or offering financial services on the doorstep.

By telephone

This is the most widely used method of communication by companies offering pension liberation services. Because they are generally targeting people below the age of 55 who may be experiencing financial difficulties, there is a ready supply of leads available from companies who offer debt management and other related services that target those in financial difficulties. If you are under 55 and have ever had contact with this type of company and did not explicitly tick or untick the box preventing your number from being passed on, then you could very well be contacted by a pension liberation company.

By text

This is another common method of contacting people who might be interested in pension liberation. Your number will have been obtained from a debt management agency or a provider of telephone data.

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What is the scam?

This type of scam typically targets those savers under the age of 55, and is also known as a pension loan, early pension release or cashing in your pension early. Even with the latest reforms, savers still cannot take their pension pot without penalties until the age of 55. That means the offer of being able to take money out BEFORE this can be very attractive to some people, especially if they are in financial difficulties.

Pension liberation is legal but is almost certainly not a good idea in almost every situation. Whilst taking up to 25% of your pension over the age of 55 is completely tax free, taking money out of your pension earlier than this age is classed as an 'unauthorised payment'. That means you can be liable for up to a huge 55% rate of tax on the withdrawal, as well as charges from the pension liberation company of up to 30%.

Being cold-called

If you have been contacted door-to-door, by telephone or by text message, completely out of the blue then you should be wary. It does not necessarily mean that it is a scam but these are the ways that pension fraudsters will get in touch with you.

Pressure

If you are being pressured into making a decision about your pension then you should be aware that you may be being scammed. Reputable advisors and companies are bound by a professional code of conduct and would never use such tactics.

Unclear contact details

If the contact details you have been given are only a website or just a mobile number or PO Box then you should proceed with caution. If you are given a physical address, google it; you may find that it is a 'virtual' office address, another favourite tactic of fraudsters.

By telephone

Fraudsters will always have ways and means to get hold of telephone numbers, so do not assume that, because you always tick or untick the box that says you do not want your number passed on, any call you receive is always genuine. There are numerous unscrupulous companies willing to pass on your details regardless of whether they have your permission or not. You may be called numerous times by the fraudsters who will use high pressure sales tactics.

By text

You may be contacted by text and, if you reply, this will open the doors for them to bombard you with calls to try and relieve you of your pension.

What is the scam?

Over the past few years, many people have seen poor returns from their pension investments, due to the global financial crunch and other factors that have resulted in poor growth for many pension pots. In this scam, fraudsters talk up the poor growth of many pension investments whilst encouraging you to transfer your pension pot into a more lucrative investment vehicle. The returns are often said to be 'guaranteed' and are way above the level of growth almost any other investment can offer.

These investments are often based overseas and are almost certainly not regulated in any way. The worst case scenario is that you will lose your entire pension pot because the investment does not actually exist. The best case scenario is that the investment vehicle does exist but you will almost certainly not get anywhere like the returns promised. In fact, you will probably get less than if you had left it in your original pension pot, as it may be poorly managed and will almost certainly have excessive fees and charges.

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How to be scam smart

For more information on pension scams, what to look out for and frequently asked questions, visit our How to be scam smart page.