How to avoid pension scams

Pension scams are a hot topic. You may have seen The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR)’s TV advert campaign warning against them. There’s a good reason they’re going to such lengths; last year the average scam victim lost £91,000. Devastating for the victims.

Worryingly, scam attempts are becoming increasingly frequent and sophisticated. While the number of pension scams reported to Action Fraud in 2017 totalled 253, it’s thought that many of these crimes go unreported. The FCA’s Lives report indicated that during 2017 107,000 people aged between 55 and 64 could have been victims of a pensions scam.

What to watch out for

If you are concerned about the security of your pension savings, there are five signs that the person you are communicating with is a scammer:

1. Unsolicited contact

This is singularly the clearest indication that the person you are speaking to could be a fraudster. Whether communication is established via phone, post, or email, you should never make financial decisions based on unsolicited contact.

Only recently four company directors were banned for a combination of 34 years for their part in a £57 million pension savings scam after cold calling would be victims. They recommended pension transfers into Self-Invested Personal Pensions (SIPPs) containing high-risk, unregulated investments. Victims were promised incredibly high guaranteed returns. In reality, the investments failed to deliver.

It’s important to mention that after a lengthy consultancy, the UK Government plan to ban cold calling for this very reason.

2. Threatening and pushy behaviour

They may sound professional, well trained and friendly at first, but scammers are aiming to contact as many people as possible in a short timeframe in the hope of maximising their effort. They will be keen to complete the transaction as quickly as possible. Take a step back if you find this situation unfolding before you.

Tactics frequently include offering time-limited deals and offering to send a courier to your property with paperwork ready to sign. Legitimate financial professionals will let you take your time. Investing and pension planning isn’t something to be rushed at all, a significant amount of time should be taken to review your circumstances and suitability for any product or service. If you feel uncomfortable during any conversation, end it immediately and find a reputable financial planner with social proof and reviews.

3. ‘Guaranteed’ high returns

It may be easy to be dazzled by the promise of high investment returns, but as tempting as it may sound if it’s too good to be true…

Big guaranteed returns simply don’t exist, there is always a level of risk involved, no matter what the scammer tells you. They may either downplay risk, avoid risk questions altogether or just misinform you about underlying saleable assets. The golden rule; the greater the potential return, the greater the risk.

4. Avoiding verifying their authority

A legitimate pension provider or investment manager will be more than happy to confirm their identity in numerous ways. A scammer might offer scarce contact details or provide those of a genuine company that they are able to intercept, with a compromised email account or VOIP phone system, for example.

If you need to call someone back, find your own phone number for them online and make sure it’s a legitimate website, not a copy of one. Never use a contact number they provide to authenticate their identity.

The best way to verify who you are speaking to is by checking the Financial Conduct Authority (FCA) register online. This will show if they are authorised to give advice and if there are any concerns with the company or person you are talking to. This step could protect your pension and retirement plans if you are targeted by criminals.

5. Claims that they can ‘unlock’ your pension

Early retirement does sound tempting, but if you receive contact saying they can unlock your pension before age 55, it’s simply untrue. Nobody can do this legitimately, without especially exceptional circumstances, like being diagnosed with a terminal illness.

If you do agree to this, assuming you see any of your pension fund at all, you may be liable for a very large tax bill from HM Revenue and Customs (HMRC) for breaking pension legislation.

What are we doing to combat scams?

The latest advertising campaign from the FCA and TPR highlights what serious problem scams are. You might think “it’ll never happen to me”, but sadly the reality can be quite different. We mitigate the risk of our communication with you being intercepted or falsified in a number of ways:

  • We will never deal with or carry out any advice recommendations via email. We will always call and speak to you to verify any requests.
  • We have launched our online portal, where you can log-in remotely to check your investments, data and contact us online. This is encrypted and absolutely secure.

If you are concerned about any communication purporting to be from Sovereign or have been offered advice by a cold caller or other unsolicited contact, do not hesitate to pick up the phone and speak to your financial planner. We are here to protect your financial future. Don’t hesitate to challenge offers that sound too good to be true.

What do our clients have to say?