Modified on: June 2023
Watch out for pension scammers – how to avoid a pension scam
Pension scammers – the numbers
Years of pensions savings could be lost to pension scammers in the space of 24 hours.
According to a new report by the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR), victims of pensions scams can lose 22 yearsâ worth of their savings in a day.
The analysis, which forms part of the regulatorsâ joint ScamSmart campaign, found it could take a pension saver 22 years to build up a pension pot of Â£82,000. This is the average size pension pot lost by victims of scams last year.
Despite the length of time it takes to accumulate pension savings, it can all be lost to scammers within the space of 24 hours; the time it takes for 24% of those surveyed to make up their minds on a pension offer.
How people become victims of pension scammers
Overconfidence was highlighted as one of the factors leading to missed warning signs of a pension scam.
The research found that nearly two-thirds of pension savers are confident to decide on their pension, but the same proportion would trust someone offering pensions advice out of the blue.
An unsolicited approach to talk about your pensions is one of the biggest red flags of a scam.
Another interesting finding within the research was a correlation between education and falling victim to a scam. The more highly educated the person, the more likely they were to become a victim.
University educated graduates were 40% more likely to accept the offer of a free pension free from a company they havenât dealt with before. 21% of more educated savers were expected to take up an offer of early access to their pension pot.
Free pension reviews and the offer of early access to a pension pot are further red flags suggesting a pension scam.
The FCA and TPR pointed out in their report that pension scams can have a devastating impact on their victims.
The consequences of falling for a pension scam can include being left with limited income in retirement, and little or no opportunity to work and save to rebuild pension pots.
For this reason, the regulators want pension savers to be aware of the warning signs of a scam and check who they are dealing with before making important decisions about their pension savings.
What the pension scam experts say
Mark Steward, Executive Director of Enforcement and Market Oversight, FCA, said:
âWe know many people have big plans for their retirement, whether itâs seeing new places, learning new skills or helping their families out financially. Pension scammers destroy those dreams, often forever. So be ScamSmart. Reject unsolicited approaches offering âhelpâ with your pension and get advice from an FCA authorised firm before making big changes to your pension fund. Make sure your lifetime savings stay yours.â
Nicola Parish, Executive Director of Frontline Regulation, TPR, said:
âPension scammers ruin lives, stealing away decadesâ of savings with professional-looking websites, âexpertâ advice and an easy manner making it tough to spot the fraud. But once you sign on the dotted line, often thereâs no second chance. Scams can happen to anyone, so before making any decision about your pension, take your time, be ScamSmart and always check who you are dealing with.â
Honey Langcaster-James, psychologist, added:
âPension scammers employ clever techniques, such as seeking to establish âsocial similarityâ by faking empathy and a friendly rapport with their victims. They can win your trust in a short space of time and by engaging with them you leave yourself vulnerable to losing a lot of money very quickly. People need to know how to spot the signs of a scam so they donât fall for psychological tricks.â
How to protect your pension savings – pension scams FCA
The FCA and TPR recommend four easy steps that pension savers can take to protect themselves from the scammers.
1 – Reject unexpected pension offers whether made online, on social media or over the phone.
2 – Check who youâre dealing with before changing your pension arrangements â check the FCA Register or call the FCA helpline on 0800 111 6768 to see if the FCA authorises the firm you are dealing with.
3 – Donât be rushed or pressured into making any decision about your pension.
4 – Consider getting impartial information and advice.
Want to know more? Check out “how to spot a pension scam in 4 simple steps”
If in doubt, or if an offer seems too good to be true, proceed with caution and get a second opinion before making a lasting decision about your pension.
Thereâs never a need to rush into decision making when it comes to such a valuable financial asset. Donât fall victim to pension scams and risk losing a lifetime worth of savings in a short space of time.
If you want to know more about how to avoid pension scammers, just drop me a line.
All the best,
James Mackay, Independent Financial Adviser in Bristol
P.s if you found this interesting, make sure to check out the 7 deadly investment scams
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