Watch out for pensions scams

The idea that you could have your pension stolen is frightening – but that is what some scam artists are aiming to do.

Pension scams have become a problem since 2014, when then chancellor George Osborne announced pensions freedom. Giving anyone with a private pension plan freedom to decide how they used it opened the door for criminals.

Typically, scams start with a cold call from someone claiming they can help you make the most of your pension pot. They often end with your pension pot vanishing for good.

New laws are designed to make things tougher for scammers – but you still need to beware.

Changing face of fraud

Before 2015, pension scams usually involved rogue firms offering victims the chance to access their pension funds early. They would charge handsomely, and leave the pension saver to deal with the fallout from the unauthorised payment and subject to large tax and financial penalties.

Now that anyone over 55 is free to take their money as they wish it is even harder for providers to monitor potential scams, which take a variety of forms.

One is to claim that funds have been experiencing poor performance in the past 12 months, and to offer alternative investments with “guaranteed returns”.  These investments range from plausible, such as syndicated property development to unlikely, such parking spaces in football grounds. They also include schemes relating to minibonds and Forex arrangements that even financial professionals have problems understanding. Most are designed to be bewildering, and with some you stand no chance of seeing your money ever again.

What is being done?

The government has recognised the seriousness of pension scams.

In 2017, HM Revenue & Customs published its response to a cold calling consultation, in which it reported the sheer scale of pension scamming. Fraudsters could be behind as many as one in 10 pension transfer requests.

While the regulators try to prevent the mass transfer of pension pots into inappropriate schemes, scammers try to find ways around the legislation. The lines can be slightly blurred when it comes to fraud versus bad investments.

Spotting a scam

If you receive a cold call about your pension, be wary. It may not be an attempt at fraud, but it is unlikely that whatever is on offer is in your best interests.

Watch out for businesses that you have never heard of, and especially those with no established web presence. Check people on the phone are who they say they are. Some fraudsters are using the name of authorised IFAs to get past safeguards.

Be wary of inducements and ‘cash back’ incentives to make a transfer. At the very least this would mean a tax penalty from HMRC.

Watch out for schemes that seem to offer results that are too good to be true – as they probably are.

What can you do?

If you are dissatisfied with your pension performance, you do have options that are legal and safer – certainly safer than trusting your retirement pot to an unknown caller who may disappear with it.

Talking to a financial professional who you trust and who is fully regulated is the only safe option. At Continuum, we have the expertise you need.