News & Insights

Avoiding Pension Scams

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.

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