The impact of pension fraud can be devastating, with victims losing an average of £82,000 last year.
Even those of us who are savvy with our money can end up falling victim to fraud. In fact, it is estimated that five million pension savers in the UK are at risk, with 42 per cent of people aged between 45 to 65 leaving themselves exposed to common scam tactics, according to the Financial Conduct Authority (FCA).
This has become a particular problem since the pension freedoms were introduced in 2015, with scammers taking advantage of the fact that savers can withdraw their money once they hit the age of 55.
Fraudsters are always finding new and clever ways of targeting victims. But while the methods are evolving, the tactics that scammers use to coax vulnerable people to buy into their shams remain relatively similar.
So to protect your hard-earned savings, it’s worth knowing some of the common tropes that con-artists use.
1. Promises of gold at the end of the rainbow
Alarm bells should ring immediately if you are ever promised a guaranteed return on an investment.
Even the most successful investor in the world can never guarantee a return, because there will always be a degree of risk that an investment could fall. If someone argues otherwise, they are misleading you.
On top of dishing out hollow guarantees, scammers will nearly always promise a lucrative, market-beating return on your investment as bait to tempt you to hand over your cash.
Jamie Jenkins, head of global savings policy at Standard Life, says savers could be wary of “guaranteed” annual returns of seven per cent or more. But public awareness around this is low – worryingly, the FCA found that 13 per cent of people aged between 45 to 65 would pursue a guaranteed return of 11 per cent on their savings.
Some fraudsters will try to reel you in by offering free pension reviews too, which is often a way to get you to disclose your financial information.
You should also be very wary of anyone who says that they can guarantee you a return by allocating all of your savings into a single investment – the best strategy is always to spread your risk across a range of different sectors and asset classes.
2. Exotic but far-fetched
It’s not just the return, though, as the type of investment is often a giveaway that something is not quite right.
Dodgy schemes may tempt you to invest in off-plan foreign property, car parking, biofuels, carbon credits, or storage units, warns Jenkins.
“At best, these are high-risk ventures which are usually unregulated, meaning it’s unlikely that you’ll be compensated if things go wrong. At worst, they are simply scams and your money will be stolen.”
Be sure to research the scheme online, and your first task should be finding out if it’s regulated by the FCA. If you struggle to find any information online, or it’s difficult to understand how the investment works, get some guidance elsewhere.
And if you have any doubts whatsoever, simply do not move your money.
3. Coming out of the blue
Unsolicited calls about your pension became illegal at the start of this year, so it should raise your suspicions if someone contacts you about your retirement out of the blue.
A consequence of this ban is that fraudsters may increasingly turn to email or social media, so always be on your guard if you haven’t initiated a conversation, or an offer has come from a company that you don’t know.
The criminals running these schemes will use slick sales tactics and can be very persuasive.
4. Caving under pressure
Scams often offer time-limited deals in order to put people under pressure to sign up to schemes quickly.
The criminals running these schemes will use slick sales tactics and can be very persuasive. Sometimes they can sound like perfectly credible financial advisers, warns Jenkins.
But while scammers will be very pushy to encourage you to move your money, once you’ve transferred your pension funds, you may then find it impossible to make any contact with them at all.
Indeed, once they have your money, scammers usually disappear. So never be pressurised into signing anything or making quick decisions.
Your pension is likely to be the largest amount of savings you will accrue, so it pays to do your due diligence and have your wits about you.