Pension Scams – Regulators urge caution

The Financial Conduct Authority (“FCA”) and The Pensions Regulator (“TPR”) have launched a joint television campaign to raise awareness of pension scams (“ScamSmart”). The campaign aims to educate individuals on some of the most common tactics used by fraudsters.

The ScamSmart campaign is targeted at pension holders between 45 and 65 years of age. In a recent poll, this segment of the population has been seen to be most at risk from fraudsters looking to defraud individuals out of their pensions. A recent poll, commissioned by the regulators, has revealed that almost a third (32%) of pension holders between the ages of 45 and 65 would not know how to check whether they are speaking with a legitimate pension adviser or provider.

Unfortunately, it is believed that only a minority of pension scams are ever even reported.

Mark Steward, Executive Director of Market Oversight at the FCA said, “The size of individual pension pots makes pension savings an attractive target for fraudsters. That’s why we’re urging anyone who is thinking about transferring their pension to check who they are dealing with and only use firms authorised by the FCA. Pension scams can cause victims significant harm – both financially and mentally. If you are ever in doubt about a pension offer, visit the ScamSmart website.”

What do pension scams look like?

Typically, pension scams are run by highly sophisticated scammers who lure individuals into transferring their pensions into fraudulent schemes. On average, it is estimated that pension scammers steal around £91,000 per victim, making the scams extremely lucrative. For the victims of these scams, they lose their savings and are often left facing retirement with limited to no income.

One of the most common tactics is to offer a ‘free pension review.’ A study revealed that one in eight people aged 45 to 65 said they would trust an offer of a ‘free pension review’ from someone claiming to be a pension adviser. As it stands, the most common method of scammers reaching their targets is via cold calling.

Cold calling is not the only way scammers get in contact with their victims. Other tactics include:

  • Unexpected contact about your pension post or email;
  • Promises of guaranteed high returns and downplaying the risks;
  • Offering unusual or overseas investments that aren’t regulated by the FCA e.g. overseas hotels or forestry investments etc;
  • Putting people under pressure to make a quick decision, for example with time-limited offers or sending a courier round with paperwork to sign; and
  • Claiming to be able to unlock money from an individual’s pension. This is normally only possible from age 55 onwards.

Scammers are usually hard to pin down as being fraudulent by those un-trained to do so. The majority mimic salespeople, building trust with their victims to try and influence their behaviour.

The “Directory”

To enable individuals to verify they are dealing with an appropriately approved adviser, the FCA plans to introduce an enhanced version of its existing FS Register (also known as the FCA Register) entitled the ‘Directory’.  The Directory is planned to include not only names and locations of those approved for the customer facing function but also their qualifications and any relevant supporting information, including restrictions on the regulated activities they are able to undertake.  In addition to the ScamSmart website, this should aid individuals to ensure the person they are speaking with is both appropriately qualified and approved by the FCA.

You can read more about the CP-18-19 Directory or send us an email or give us a call.