How to Spot a Pension Scam

Date : 11 May 2019
posted By : eff_admin

The government, the media and even IFAs are all shouting about it, so, unless you’ve spent this year on a desert island, you will know that pensions are a red-hot topic. Slowly but surely, the Treasury have been disclosing their pension reform plans to us; their promises about reduced taxes and increased flexibility with our pension pots sounds like music to our ears. We finally seem to entering into better times and can start to look forward to our golden years. But lurking behind this hope-filled news creeps a more sinister problem; pension scams.

In times of austerity comes desperation. Thousands of pre-retirees are starting to panic that they haven’t saved sufficient sums for their retirement or that, due to poor interest rates and high inflation, the growth of their pensions has been stunted and eroded. Those anxious about their future become the perfect prey for the unscrupulous pension scammers to sink their claws into. Many people have lost their entire life savings to these felons, so you must make sure that it doesn’t happen to you.

What is a Pension Scam?

Pension scams, sometimes referred to as ‘pension liberation fraud’ and ‘pension loans’, are designed to separate you form your pension savings and are often disguised as ‘unique investment opportunities’. Fraudsters will approach an individual in numerous ways, such as cold calls, door to door sales, via text message or by email. More often than not, these unsolicited sales pitches will be out of the blue and will sound too good to be true. These proposals, pushed by aggressive sales people, will promise multiple benefits, such as free pension reviews, ‘cashback’ from your pension and new, creative investment propositions with incredibly (unbelievably) high rates of return. The hook, however, is that these schemes will enable you to access your pension savings before you’re 55.

So What Are the Risks?

Firstly let me make something very clear: unless you have a very rare clause in your pension agreement, you cannot take your pension before you are 55. The promises these pension scammers are making are bogus. If you try to take your pension early, the resulting tax charge could decimate over half of the value of your pension pot. The pension scammers will probably not tell you about this tax implication. They also will not be open about their extortionate fees, which often total 20% to 30% of your fund’s value! And this is the best outcome; sadly some people completely lose their pensions by transferring all of their hard earned savings into these spurious schemes.

How Can You Spot a Fake Scheme?

If you are approached out of the blue regarding your pension, look out for the following signs:

  • Be wary if the adviser/ sales person is overly pushy and claims to ‘liberate’ your pension before you turn 55. These individuals are often unregulated and will probably not have your best interests at heart.

Take care if a company is offering you a ‘loan’, ‘savings advance’ or ‘cashback’ from your pension.

  • Watch out for any reference to ‘loopholes’, ‘overseas investments’ or ‘new, innovative investment techniques’.
  • Put the phone down/delete the message if the company claim to be from the Government or Money or Pension Advisory Service. These institutions will not contact you out of the blue to talk about your pension!

So What Can You Do?

Once you’ve transferred your pension it may be too late, so make sure you look out for suspicious signs and make informed decisions. You should never be rushed with anything to do with your financial planning. Before you agree to any transfers, investments or other financial commitments, your circumstances and goals should be carefully reviewed and all suitable recommendations should be presented to you. This process can take a few weeks to prepare, so be careful if these ‘advisers’ make a recommendation in a few minutes!

Of course, all advisers follow slightly different processes, so the ultimate safeguard is to check with the FCA. The Financial Conduct Authority govern all regulated advice. If the firm or adviser is not registered with the FCA, you may want to think twice about using their services. You can check whether a firm is registered with the FCA by visiting

You can also have your recommendations independently checked by the Pensions Advisory Service, by calling 0300 123 1047. If you have already accepted an offer, raise the alarm by calling Action Fraud on 0300 123 2040.

We all want to maximise our pension pots and many of us would be incredibly thankful of a cash injection prior to retirement. It is no wonder that so many have fallen foul to these sham schemes, but it’s important to remember that there are many, legitimate, alternatives for your financial planning. We will always recommend utilising the services of an independent, FCA regulated financial planning firm, who place your needs and aims at the heart of everything they do. A good Financial Planner will explain all risks, fees and implications and clearly map out your financial future.

If you, or anyone you know, is concerned about the performance of their investments, pensions or want to discuss their overall retirement planning, we would be happy to help.

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