The rising cost of living could lead to more vulnerable people being gripped by pension scammers’ false promises this winter, The Pensions Regulator warned.
To highlight the magnitude of the threat, TPR estimates that £2.5 trillion in UK pension wealth is ‘accessible’ to fraudsters, making it a ‘massive target for criminals’.
The regulator, which has published a list of seven major retirement scams to watch out for, is concerned that savers could be tempted by offers to access their retirement savings early to cover essential household bills, or be attracted to bogus high-value investments. returns that are never realized.
Fraud is ruining lives: make sure you know about the top seven pension scams in the UK now
In an effort to stay one step ahead of the crooks, TPR today launched a new strategy for fighting pension scams.
The regulator said it would do more to educate savers about the threat posed by scams, and to prevent practices that hurt people’s pension pots and plans.
As part of its new strategy, TPR has outlined various types of retirement scams, including investment fraud and fake retirement liberation scams.
It has also highlighted “recovery room” scams, where fraudsters approach pension savers who have already been scammed and offer to help them get their money back against an upfront payment.
Seven Retirement Scams to Avoid
The pension regulator has listed seven different types of retirement scams that savers should avoid.
The list, which is not exhaustive, shows the size and scope of the methods that crooks use to try to part with your hard-earned retirement savings.
1. Investment Fraud – misrepresentation of risky or false investments to savers.
2. Retirement Liberation – tricking savers into accessing their pension pot before the age of 55, which entails a hefty tax burden – even if the money has already gone missing in a scam – or potentially involves tax evasion.
3. Scams pension schemes and providers – setting up schemes to deceive victims that either don’t exist or do exist but commit fraud.
4. Clone companies – disguising scam schemes and providers as legitimate entities.
5. Claims Management Companies – cold calls to claim savers mis-sold a pension, then request an advance to initiate a claims process.
6. Employer Related Investment (ERI) – violating restrictions against employers who divert employees’ retirement payments to invest inappropriately in their business, leading to losses for savers.
7. High Cost – imposing excessive fees, often layered by unnecessarily complex corporate structures.
Retirement scams can decimate retirement plans and leave people tens of thousands of pounds out of their pockets, and in some cases it is impossible to recover all the money.
Nicola Parish, executive director of frontline regulation at TPR, said: “Criminals who steal people’s pensions are ruining lives. It’s clear and simple. And as an occupational pension regulator, our primary focus must always be to ensure that savers’ retirement money is protected now and in the future.
“Scammers use psychological trickery and professional-looking materials to lure people out of their savings. If they can, they will take every penny and ruin the financial future of savers.
“That’s why we are committed to doing everything we can to educate savers about the risk of scams and to stop scammers.”
Parish wants the pension industry, regulators and government to do more and “really work together to put savers at the heart of everything we do.”
TPR said: ‘We want the industry to improve savers’ engagement with their pensions and be proactive in their warnings about pension scams. Schemes, providers and advisers can and must do more to make pensions work well for consumers.’
TPR has committed to developing a strategic threat assessment of the Retirement Scams Action Group annually or biennially and to explore the creation of a dedicated scam hub to coordinate intelligence.
The regulator also announced that it will look into opening a “regulatory sandbox” to allow pension industry insiders to test solutions for fraud prevention and intelligence gathering in conjunction with other relevant watchdogs.
TPR said that because pensions are complex and financial literacy is generally quite low, an increasing number of savers could be ripped off from their retirement savings this year.
Becky O’Connor, head of pensions and savings at Interactive Investor, said: “Pension scams involving people’s savings are among the most devastating. They are bluntly ruining lives.
“With the cost of living biting harder than ever, the lure of false promises such as early access to retirement or higher investment returns is making people even more vulnerable than usual.
“Preventing pension scams should be one of the most important things on the agenda and we need to start with a better understanding of what a pension scam actually is.
The Pension Supervisor’s ‘Seven Types of Retirement Scams’ is useful and worth a read for anyone with a pension.
‘Anyone can be targeted, including people who have not yet retired. Scammers are so smart now that you may not even realize you were vulnerable to this kind of marketing talk until it’s too late.
‘For a sector where scandals are not unknown, it is vital to suppress pension fraud. Confidence in pensions is important if people can retire well in the coming years.
“We need people who handle their retirement savings with confidence and certainty, not live in fear of touching them.”
Tom Selby, head of pensions policy at AJ Bell, said: ‘The past two years have already been incredibly difficult for millions of people, with coronavirus and lockdowns taking a huge toll on people’s physical and mental wellbeing, including their financial health in some cases. .
In addition, the cost of living is rising rapidly and the energy price ceiling will rise again later this year.
“All of this means that millions of Britons will be on or near the financial precipice by 2022. Depressingly, this is a perfect environment for scammers to thrive.”
He added: “Unscrupulous fraudsters will try to exploit vulnerability in every way possible, from offering ‘early access’ to pensions to pushing dodgy investments that promise sky-high, guaranteed returns.
“These kinds of offers can be particularly tempting for those with inflation on the verge of double-digit inflation.
However, the reality is that unless you are seriously ill, early access to your pension will result in a huge tax penalty from HMRC, while you are lured by a scammer’s promise of skyrocketing investment returns, making you lose everything.
“Regulators are right to be at the forefront of this and the vast majority of the pension industry is ready to educate clients about the risks.
“It’s very positive that TPR is taking steps to improve information sharing and test new scam prevention solutions. It is vital that companies share their concerns about schemes, companies or individuals with the relevant authorities, and vice versa, to ensure that as many savers as possible are protected.”
Five tips to avoid becoming a victim of pension scams
Staying ahead of scammers is no small feat, but experts at AJ bell have laid out five easy steps to avoid falling victim to scammers who want your money.
1. Hang up if someone calls you out of the blue!
If someone calls you unexpectedly and wants to talk about your retirement, it’s best to hang up immediately.
Most people will at some point have received a call from someone they don’t know, claiming to offer an incredible investment opportunity for their savings or a “retirement assessment” service. If this happens, end the call immediately.
Also, don’t respond to text messages, emails, or social media posts that claim to be the key to retirement nirvana. In all likelihood, this will be a scammer phishing scam to victims, so whatever you do, don’t fall for it.
2. Don’t Deal With Unregulated ‘Advisers’
While phone, text, email, and social media remain the primary weapons of the modern day scammer, some continue to knock, mostly targeting older people who they believe are more vulnerable.
Make sure you only trade with FCA Regulated Advisors. This is especially important because if you are sold an investment by an unregulated person, you will not be able to claim compensation.
3. Be wary of foreign or crypto investments that promise sky-high returns
Scammers often promise double-digit returns from exotic investments in distant locations.
Promoting “opportunities” for cryptocurrency investments has also become an increasingly popular route for fraudsters.
If you are told that you can get an annual yield of more than 10 percent from a teak plantation in South America or a hotel room in Spain, proceed with caution.
Often, fraudsters will advertise investments in an asset that does not exist or has not yet been built.
4. Beware of schemes that offer ‘guaranteed’ returns
Nothing is guaranteed when it comes to investments. If a company you’ve never heard of says it can deliver “guaranteed” returns of any amount, don’t touch them with a barge pole.
5. Don’t rush to make a decision
Don’t be forced to do something you don’t feel comfortable doing and may regret by a pushy salesperson or saleswoman who is desperate to increase their commission.
Your pension may be the most valuable asset you’ve ever owned, so invest wisely.
And if you’re not sure at all, check out FCA’s ScamSmart website or speak with a regulated financial advisor before making a decision.
Some links in this article may be affiliate links. If you click on it, we can earn a small commission. That helps us fund This Is Money and use it for free. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.