Pension scam and fraud in 2022: how to avoid them

8 December 2022 by Robin - 11 minutes of reading time

pension scam in 2022

What is a pension scam? How can I spot a scam? What are the warning signs? Are there any ways that I can protect myself? You may be elderly, although you do not have to to have a pension. Then, if you have a pension, you could be targeted by pension scammers. These people and organizations will try to scam you out of your pension pot. Most of the time, they will try to make you transfer money in your pension pot to steal it from you. Your Benefits will tell you everything you need to know about pension scams.

What is a pension scam?

When it comes to pensions, there are a lot of people who would like to scam you out of your pension. They could have advanced phone services and even websites. However, there are warning signs to a pension scam.

Typically, a pension scammer will promise very low risk and pretty high returns. This is what draws people in. Then, however, they will typically take your money and leave you with nothing.

You could believe that you are too financially savvy to be affected by a pension scam. However, they can often be very effective, even for those who believe they would never fall for them. 

How can I spot a pension scam?

How can I spot a pension scam?

It’s vital to know what the warning signs of a pension scam are. In fact, a lot of them will often make the case that you should invest your pension savings. They may ask you to invest all or some of it. Their goal is often to scam you out of your life savings.

Pension scams will often present their false ‘investment opportunities’ as high-risk investments. These investments are typically somewhat unusual. They include things such as storage unitsparkingforestryrenewable energy bonds and overseas property and hotels. Additionally, they can also simply steal from you.

The scammers may propose something else. In fact, they could ask you to transfer your pension to another scheme. More specifically, into a single member occupational scheme. They may also use other types of occupational pension schemes.

Pensions scammers will often tell you that you could take money out of your pension potearly‘. In fact, they would tell you that they know of a ‘legal loophole‘. However, they may inform you that they use loans in order to achieve this.

You may want to draw money from your pension pot. In fact, pension scammers may say that you can do this through legal loopholes or loans. However, if you do this before you are 55 years old, you could be billed by Her Majesty’s Revenue and Customs (HMRC).

You may want to transfer your pension pot to another scheme. Then, you should talk to an independent adviser. More specifically, one that is authorized by the FCA (Financial Conduct Authority). In fact, in some cases, you absolutely have to do this to transfer your money.

What are the warning signs of a pension scam?

You may receive cold calls from pension scammers. You can likely immediately dismiss them as scammers. In fact, this is because cold calling about pension schemes is completely illegal. This has been true since 2019.

Being cold-called about a pension scheme likely means it is a scam. However, since it is illegal, pension scammers now employ different methods as well. For example, they might have an official-looking website.

For example, pension scammers may then reach you through social media. They may even try to contact people who know themselves, to try to get a group of people to increase legitimacy. Additionally, they may use more common practices, like gifting someone a free pension review.

There are also phrases that a pension scam may use. This includes the following phrases: ‘cashback‘, ‘one-off investment’, ‘savings advance’, ‘loophole‘, ‘loan’‘pension liberation’, ‘free pension review’.

Pension scammers may make promises they do not plan on keeping. This includes promising better returns on your savings, compared to your current pension scheme. They could even do this in a long-term pension investment. Then, it could take several years until you realize something is wrong, at which point it’s too late.

What are other warning signs?

A pension scam may involve an investment structure that is deliberately overly complicated and difficult to understand. Typically, they may also propose unusual and risky investments. This includes unregulated, overseas schemes. Most of the time, these are schemes with absolutely no consumer protections.

Pension scammers may also use high pressure sale tactics. This could include things like ‘limited time’ offers, where someone has to ‘act quick’ or ‘miss out’. Additionally, this could involve sending certain documents by post, or have to wait until certain documents are signed.

Moreover, another tactic that pension scams may employ is to tell you that their scheme includes being able to withdraw money from your pension pot before you turn 55 years old. However, if you do so, you could be billed by Her Majesty’s Revenue and Customs (HMRC).

There are certain rules when it comes to withdrawing your pension. More specifically, the following are the rules for withdrawing your personal pension:

Personal Pension withdrawal rules
Percentage of your Pension Fund that you can withdraw Will you have to pay taxes on your withdrawl?
25% No
75% (needs to be withdrawn within 6 months of withdrawing your 25%) Yes (typically)
If someone contacts you and tells you any of these, they would be considered as being amber and red flags. This would mean that you could then be unable to complete your pension pot transfer.

How do I report a pension scam?

How do I report a pension scam?

There are different ways to report pension scams depending on where you live. You may reside in Scotland. Then, you can contact Advice Direct Scotland, by phone on 0808 164 6000. Additionally, you can contact Police Scotland by dialling 101.

Otherwise, you may live in Northern Ireland or England. In this case, you can report cybercrime and fraud. However, this is only for crimes that already happened. Then, you can report them to Action Fraud.

Reporting scammers is very important. In fact, this is the case because then, the police and authorities can investigate pension scams. This can also allow elected officials to better know what pension scams look like, to be able to pass effective laws.

You may have suspicions about something being a pension scam. However, you may not be sure. Then, you should still report it. If you live in Scotland, do this to Advice Direct Scotland. Otherwise, contact Action Fraud. In both cases, you can also contact the Financial Conduct Authority

How can I protect myself from pension scams?

You may be worried about falling for a pension scam. Then, there are different ways you can protect yourself from pension scammers. You can do this in a multiple of different ways.

To protect yourself, be weary of texts, emails, unsolicited calls and even physical visits about pensions schemes. In fact, you will not be contacted or called out of nowhere by regulated and legitimate companies.

Additionally, you could get a financial adviser. They would be able to let you avoid pension scams more effectively. Additionally, the FCA has a Scam Smart website. This will tell you how to avoid pension scams.

If a pension provider is not registered with the Financial Conduct Authority (FCA), it’s likely to be a scam. Check the FCA register or warning list to check if a provider contacting you is a scammer.

How else can I protect myself from pension scammers?

Scammers could tell you to not talk to your family, employer or provider about the transfer. In fact, they would try not to let you transfer your pension pot. However, your current pension provider has to do their due diligence. Then, they may suspect that the pension scheme is unsafe. In this case, they have to protect your pension pot.

With pension scammers, some contact information may be suspicious. For example, they may have a random address for their registered address. You may not be able to contact them through this means. Additionally, their official phone number may be a random mobile number. If things seem fishy, stay alert.

You should also check for the reputation of the company online. More specifically, you should check forums and social media. In fact, some companies may fake positive comments and reviews, like on Yelp. As such, forums can sometimes be a better source for authentic reviews of services and companies. 

You should also ask the pension provider for their HMRC registration status. This is to check that the scheme is indeed registered and authorized. This is especially true if the scheme that’s proposed is high risk. Then, make absolutely sure that the scheme you would put your money in is legitimate.

What if pension scams claim to be government-backed?

A pension scam may claim to be government-backed. In fact, they could imply it, that they are in the Pension Wise service. They can do this by including certain words in their name, like ‘pension’, ‘guidance’ or ‘wise’.

You could ask for a Pension Wise free appointment. Then, you would be able to receive free advice on what you can do with your pension. However, note that they will never cold call you. To ask for one, you can do so on the Pension Wise website.

You may receive a cold call from someone. Additionally, they may claim to be from a government-backed organization, or the government itself. If this is the fact, hang up. The government or government-backed organizations would not cold call you about transferring your pension. 

You may not get your pension pot back if you decide to transfer it to a scammer. As such, you need to make absolutely sure that you know that a pension scheme is legitimate before transferring any money. 

What are the different types of pension scams?

There are different types of pension scams. A common one that is easy to spot are cold calls. In fact, this is the case because cold calls about pension schemes are illegal. This type of pension scam could also be called Vishing. This is true if the pension scammer pretends to be from the government or a government agency.

Pension scammers may also include things such as phishing. Then, scammers could try to appear like they are HMRC or even your bank. They will often do so through emails. If they try to appear like they are from HMRC, they could attempt to make you believe that you need to transfer your pension scheme.

If a pension scammer attempts to appear as if they are from HMRC, they could set out to steal your information. In fact, they can do this by faking a government website. Then, they ask you to log in on this fake website that looks like a government website. Then, if you attempt to log in, they likely already stole your information.

You could also be eligible for other benefits. Then, Your Benefits can help. In fact, we provide many articles about different benefits you could get. Additionally, we provide a free simulator which can show you all the financial aid you are eligible for. This will show you money you could be missing out on. 

How can I spot a phishing email?

There are different things you can do to spot a phishing email. First, you can check the email address that the email is sent from. A legitimate email may be sent by an email address such as ‘noreply@bankname.com’.

However, a phishing email will often be sent from an email with another domain, such as ‘noreply@xyz123bankname.com’. Always check the full email address of emails sent to you about sensitive information.

Another way to check if an email is a phishing email is through what they refer to you as. In fact, official emails will typically have your name at the beginning of the email. However, phishing emails will often refer to you as ‘sir’, ‘madam’ or ‘customer’.

You can contact the FCA on 0800 111 6768 or 0300 123 2040. That’s their contact details. Furthermore, they are not a financial service and may not give certain financial advice. You can learn more about pensions advice, pension opportunity, but not time limited offers. Time limited offers are often likely to be scams.

Robin is a writer for Your Benefits, writing about aids that people may be entitled to. He is currently working on his Master in journalism at the Institut Supérieur de Formation au Journalisme in Lille.

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