A warning has been issued over seven pension scam tactics being used to exploit people who are saving for their retirement.
Savers can take money out of their pensions from the age of 55, and criminals are trying to get them to hand over some of their hard-earned money. Some of this cash is simply stolen, while some is put into expensive or high-risk investments.
UK watchdog the Financial Conduct Authority (FCA) says a quarter of consumers would withdraw pension savings to cover the cost of living. And the data backs that up, reports The Mirror.
Read More: Scam warning issued to Christmas shoppers over deals 'too good to be true'
Retirement income market figures show that the number of pension plans accessed for the first time in 2021/22 increased by 18% to 705,666 compared to 2020/21 (596,080). Now the FCA is warning that scammers are using ‘misdirection’ tactics to con victims into putting their pension cash into criminals' pockets.
The FCA found that 44% of 1,000 people surveyed would take up the offer of a free pension review – but this is a classic distraction tactic. Around 17% of the over-65s are still in work simply because they cannot afford to retire on their current pension.
More than a third (37%) are not confident they have enough in their pension to last their whole retirement. But scammers will prey on their victims’ misunderstanding of how pension savings work to secure their hard-earned money.
The seven most common pension scam tactics
- Promises of higher returns
This is where scammers guarantee they can get you better returns on your pension savings if you transfer them some of your cash.
- Help to release cash from your pension for the under-55s
You can only access your pension cash from the age of 55. Any offer to release funds before that age is highly likely to be a scam, and has major tax implications.
- High-pressure sales tactics
Often scammers try to pressure you with ‘time-limited offers’ or even send a courier to your door to wait while you sign documents.
- Unusual investments
These are often unregulated and high risk, and may be difficult to sell if you need access to your money.
- Complicated investment schemes
If you aren't sure where your money will end up, be aware that it could be a scam.
- Several groups being involved
If there are many people and groups involved in a pension deal, it may mean they are all taking a fee. That means the total amount deducted from your pension is significant.
- Long-term pension investments
Investing in these could mean it will take several years before you realise something is wrong.
If a consumer deals with an unauthorised firm, they will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong. That means they lose any right to compensation or investigation.
The FCA is calling on all consumers to check the information on its Scamsmart website, including the Warning List, before making any decision about their pension. This will help identify any firms that are actively running scams, or flag to consumers the signs to look out for to avoid being scammed.
FCA executive director of enforcement and market oversight, Mark Steward, said: "Many of us have sat in awe as magicians make things disappear right in front of our eyes, despite us thinking we are in control, or can see everything going on. But the trick ends there, and we can enjoy the rest of our night.
"That doesn’t happen with pension scams. The rising cost of living is affecting people at all savings levels, and pension scammers are taking advantage of this."
Read Next:
-
Octopus Energy giving away free electric blankets to help with heating bills
-
Drivers putting the brakes on their cars and cutting down journeys as cost of living bites
-
DWP £900 Winter Fuel Payment - when it will be paid and who is eligible for the support
-
Nine ways to cut the cost of using your tumble dryer this winter
-
HMRC to refund 60,000 people who had tax rebates processed by third-party firm
