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How to avoid a pension scam

Receiving unsolicited telephone calls should be a thing of the past with the UK government having clamped down on this unwelcome activity – making it illegal for anyone to make such calls from January this year. There is however no such rule in Cyprus, so you must be aware of the risks when discussing your pension savings with a firm that you have either not heard of or who are not authorised to give you such advice.

Cold calling is the most common method used to initiate pension fraud. The Money Advice Service estimates as many as eight scam calls occur every second – the equivalent of 250 million calls per year. The changes to pension rules in 2015 now mean that pension pots can potentially be fully cashed in – resulting in the countless scams suggesting all sorts of supposed investments that either don’t exist or offer supposed guaranteed returns.

With interest rates at less than 1%, guaranteeing returns of 8-12% is quite simply impossible. If you are offered these types of returns then the only guarantee is that it is a scam. If you unfortunately receive an uninvited call from someone asking you about your pension savings then I suggest the following points to ensure that you are not the latest victim:

  • If you are contacted unexpectedly about your pension fund by phone or SMS this is an automatic signal that it is a scam as it is illegal in the UK;
  • If the caller says that you can access your pension money before age 55 and that they can help you release the money then this is again illegal;
  • If you are encouraged to take out a large lump sum, or even the whole pension pot in one go, and that you are told they can invest it for you is a tell-tale sign of a scam;
  • If the caller uses words like loophole or one-off investment opportunity then it is likely to be a fraud;
  • If you are offered investments that are described as being ethical, new opportunities especially in sectors such as forestry, overseas hotels, storage units, airport parking spaces then they more than likely don’t even exist.

The good news is that you can get professional, regulated advice on your UK pensions and we have been doing exactly that for over 30 years. We would never offer any investment scheme without first going through our thorough Fact-Finding process. Only then can we determine whether transferring your pension is in your best interest. The key therefore is to not be drawn in by unsolicited calls from someone promising you something that does not exist. Instead, only consider firms that are well established and authorised to help you.

Cold calling is the most common method used to initiate pension fraud. In 2013, 97% of pension fraud cases brought to Citizens Advice stemmed from cold calling. Almost £5m was lost to fraudsters in the first five months of 2017, said the government, and it was estimated that since April 2014 a total of £43m had been taken. People targeted by scammers lost an average of £15,000 each.

To avoid coming unstuck by a pension scam, we’ve outlined the ways you can spot a malicious cold caller.

Unexpected contact will always signify a pension scam

In the UK, it’s against the law to contact somebody unexpectedly to discuss pension funds and retirement plans. This applies to both calls and SMS messages. If you experience anything that sounds like this, chances are that the caller is trying to tempt you with a pension scam.

Early pension release scams

The earliest age that you can access your retirement fund in the UK, and withdraw from your pension pot, is 55. If a caller is offering you the opportunity to access your funds early, take this as a guarantee that they are trying to sell you a pension scam.

Buzzwords are the tell-tale sign of a pension scam

Often, callers trying to get you involved in one of their pension scams will use language such as ‘loophole’ or ‘one-off investment’ to encourage you to take advantage of various back-alley routes to your pension pot. Keep an ear out for any buzzwords you hear from your caller, and consider these an indication of a pension fund scam.

Look out for pension scams that seem too good to be true

Typically, fraudsters contact savers and offer low-risk investments with high returns, persuading them to transfer their money from their existing retirement fund into pension scam schemes. When new flexibility rules allowing people access to their funds were introduced in April 2015, there were warnings that this could prove costly to consumers unable to distinguish between scam calls and marketing from genuine firms. It’s also advised that you remain alert of any pension release scams that offer much better interest rates to those offered elsewhere.

Beware of callers pressuring you to invest in pension scams

If a cold caller is pressing you to invest in a scheme, suggesting that they’re offering a time-limited deal, then you should be wary of it being a pension scam. This also applies to cold callers offering a special discount or bonus if you apply by a certain date.

If you believe the call may be a pension scam, refuse to do business over the phone and take the time to investigate. Any reputable caller will allow this, whereas one offering a pension fund scam will try to pressure you into committing there and then.

How the cold calling ban reduces pension release scams

The cold-calling ban prevents all cold calls, emails and texts about pensions, and is enforced by the Information Commissioner’s Office. The ICO has powers to fine companies up to £500,000 if they break its rules, although it can only take action against companies based in the UK. There will be two exemptions to ensure legitimate calls are not affected – companies will still be able to contact consumers who have expressly requested information, and will still be allowed to make marketing calls to existing clients.

Along with the ban, there are also rules to make sure that only active pension schemes, with up-to-date accounts, can register with HMRC. Prior to it finally taking effect in 2019, the pensions minister, Guy Opperman, said: “If people have saved for a private pension, we want to protect them. This is the biggest life’s saving that individuals normally make over many years of hard work. By tackling these scammers, people should know that cold calling, apart from exceptional circumstances, is banned.”

Making pension schemes harder to set up and ensuring transfers only proceed to appropriately regulated schemes will certainly help to blunt the damage that callers trying to sell pension scams can inflict. To add a further safeguard, it is also advisable to ask for at least one reference that you can speak to, preferably who lives in your area. The referee can then give you added reassurance that the company you are dealing with is legitimate.

Finally, a simple check that the company is also regulated to give you advice is an absolute must. There are many firms that target expats in Cyprus who are not authorised to do so – so be aware. The requirements from HMRC are getting tighter and tighter for pension transfers which  is welcomed by Blacktower as it ultimately protects the consumer. We have been assisting clients with their pension transfer requirements for many years and have all the safeguards in place to ensure that you receive proper, qualified advice in this very technical area.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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