Pension Scams and the Law: How to Protect Your Retirement Savings in the UK

On November 30, 2021, the UK government passed new rules to prevent pension scams. Pension trustees and scheme managers now have the power to block suspicious transfers.

Pensions Minister Guy Opperman stressed the need to protect savers’ money. Scammers often lured victims with offers that sounded too good to be true, like free pension reviews or early access to funds.

With the new rules, trustees could flag suspicious requests with a “red flag” to stop transfers to scam schemes. If there are signs of fraud, the trustees could issue an “amber flag” to stop the transfer until the member proves they got guidance from the Money and Pensions Service (MaPS).  [1]

Want to learn more about pension scams and how to protect your savings? Keep reading!

Types of Pension Scams

Listed below are the common pension frauds in the UK.

Pension Liberation Scams

Scammers target people under 55 to mislead them into withdrawing pension funds. They promise quick access but often impose high fees (20-30%) and tax penalties. Victims remain unaware of the risks.

Investment Scams

These scams lure savers with tempting investment opportunities. There are two main types:

• Terms-of-Service Scams: Scammers set up complex business structures to charge high fees, a fractional scamming technique. They hide costs in fine print to trick clients.
• Pension Mis-selling: Scammers convince savers to trade safe pensions for riskier ones or even cash. They could make high-risk investments, like cryptocurrency or overseas property, and appear safe with misinformation.

Annuity Mis-selling

Scammers trick people into buying annuities that are either too expensive or inappropriate.

Claims Management Scams

Scammers claim people have mis-sold pensions to them and demand upfront fees to begin the claims procedures.

Employer-related Investment Scams

Sometimes, employers mishandle pension schemes. They may, for instance, put the money into investments that are riskier so as to benefit the employer. This would ultimately end up costing the employees

Imitation Scams

Scammers often pretend to be legitimate organizations to trick savers:

• Advice Scams: They act like financial advisors and offer “free” advice. Their goal is to collect personal information and push you into fraudulent schemes.
• Fake Pension Schemes: Scammers set up fake companies to deceive both savers and pension providers. They may use fake approvals to look legitimate.
• Clone Firms: These fraudsters mimic real companies. They use similar names and registration numbers and create look-alike websites to mislead savers.
• They Impersonate as Trusted Organizations: Scammers pose as agents for reputable companies to acquire personal information or frighten the savers to wire funds. 

Repeat Scams

Scammers promise to restore lost money in exchange for a fee may pursue victims once again:

• Recovery Fraud: They offer to give back lost investments for a payment.
• Advance Charge Securities Scam: A buyer claims to be interested in assets that require a prepayment charge.
• Smishing: Scammers send fake messages that seem authentic to get your personal information or money.

If you’re concerned about a suspicious pension offer or need assistance with a pension claim, consider consulting with a pension claim consulting expert.

How Can I Avoid Pension Scams?

1. Stay Calm and Take Your Time

If you get unsolicited calls or texts that offer you early access to your pension, think again. Scammers often use high-pressure strategies to manipulate you. Take your time and then consider any offers.

2. End the Conversation

If you feel fraudsters are pressuring you during the call, hang up. Scammers will try to keep you on the line, but you can cut the call.

3. Trust Yourself

Trust your instincts. Remember, it’s code red if an offer looks too good. Scammers will make grand reward promises, but you must be careful. If something doesn’t feel right, step back and understand the problem. It’s always better to be careful than to risk losing your savings.

4. Don’t get pulled in or rushed

It’s probably a scam if you’re being forced to choose quickly and informed this is a “once in a lifetime opportunity” or “only available for a limited time.” Spend enough time making all the necessary checks, even if it means declining an “amazing deal.”

Conclusion

If you receive an unexpected call about your pension, it’s best to hang up. Cold calls about pensions are illegal and likely a scam. Similarly, ignore any offers you get via email or text.

Report pension cold calls to the Information Commissioner’s Office (ICO).

Before making any changes to your pension, seek financial guidance or advice.

When looking for an adviser, ensure the relevant authorities authorize them. Avoid taking advice from the company that contacted you, as it may be part of the scam.