Watch out, watch out, there’s a pension scam about!
If you’re over 50 and you have a pension you are someone unscrupulous fraudsters could be targeting.
The Pension Advisory Service (TPAS) advises that fraudulent activities are becoming more prevalent. People are being encouraged to cash in their pension fund to invest in high risk, unregulated, expensive and sometime fraudulent investments. You may not know, but these schemes do not have the protection that pension schemes have and some are completely unregulated, so if it goes wrong there is no safety net.
Here are some new scams we have heard of:
- You are asked to transfer your pension into a UK-based self administered pension scheme that offers high risk and unregulated investments
- It is suggested that you transfer your pension scheme into an offshore-based pension fund recommending high risk investments. Again, this may not have the same investor protections
- You are persuaded to cash in your pension and invest in a high risk and unregulated investment
The Tax Man will be watching
Most of us are aware that it is now possible to access up to 25% of your pension as a tax-free lump sum. However, if a firm or person offers to help you access your whole pension pot as a cash lump sum and you are under 55, you will be breaking rules and you will be liable for tax if you access your whole pension pot. Always check yourself, usually fraudsters will not make tax liabilities clear or even mention them at all.
Tips on types of scam to watch out for
Pension scammers are very clever and some fraudulent schemes will appear to be legal. Company names may include words which are used by government or other authorities like “wise”, “advisory”, “service” and some scammers may even suggest that the Government has asked them to contact you.
Here are some common features of pension scams:
- Look out for phases like: ‘one-off investment opportunity’, ‘free pension review’, ‘legal loophole’, ‘cash bonus’, ‘government endorsement’. Be wary of these phrases, for example, government services like the Pensions Advisory Service and Pension Wise, will never make unsolicited calls or ask for personal information about you or your pension. In fact, it’s up to you to arrange an appointment with Pension Wise for advice. So if someone calls you, it is likely to be a scam. Beware of companies claiming to be backed by government – they are making false claims.
- High-pressure sales tactics such as being approached out of the blue over the phone, via text messages or in person door-to-door. If someone calls you, always call them back. Legitimate companies will be happy for you to do this. Scammers are usually not happy to be contacted or may provide you with false information.
- Schemes which transfer your money or investments overseas, meaning the money is harder to recover.
- Suggestions to access to your pension pot before you reach 55. You can only do this in special circumstances: if you’re suffering from ill health or have a special protected retirement age because of your occupation. If you access your pension early you may lose some or all of your pension and receive a tax penalty from HMRC for an ‘unauthorised payment’ from your pension.
- Not leaving you with a copy of any documentation.
- Pressure to speed up the transfer of money to the new scheme; sometimes even sending a courier to your door with papers to sign.
- Scams may be presented as unique investment opportunities offering high rates of return. If someone offers you a rate of 6% or more guaranteed investment return, you should be on high alert. This is not a typical rate of return. Also, legitimate companies would normally check your attitude to risk before they suggest investments.
- Unregistered companies. Companies not registered on the Financial Conduct Authority’s Register should be treated with caution. By checking the FCA’s register, you’ll be able to see if the company is registered and also the firms currently under investigation. Go to fca.org.uk/register or call 0800 111 6768.
- Scammers may target a particular town or county. Once they have hooked one or two people successfully they may target more people in the same area. So, if you hear that someone you know has invested their pension in an new investment or scheme, don’t rely on their advice. Even if they are financially astute or related to you, it is your responsibility check the company and investment.
What to do if you have been scammed
If you do become a victim please report it to Action Fraud and if you have signed papers and realise it is an investment scam report it straight away to Action Fraud by calling 0300 123 2040 or online.
The Financial Conduct Authority also has a Consumer Helpline on 0800 111 6768.
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