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Consumers are missing signs of pension scams

Consumers are missing signs of pension scams

Category: Pensions
Author: Leanne Macardle
Date: 31/03/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

We all like to think we're pretty savvy when it comes to financial matters; that we're always on guard and would spot a scam artist trying to con us out of our hard-earned cash from a mile away. Unfortunately, this may not be the case, with research from Citizens Advice finding that the vast majority of people actually miss common warning signs of pension scams – despite being confident that they'd spot them.

Missing the signals

The report reveals a clear mismatch between people's confidence in spotting a scam and their ability to actually do so: 76% of respondents said they were confident in being able to identify a pension scam, and yet when presented with one, just 12% were able to identify it as such. This means that 88% of people miss common warning signs of pension scams (such as cold calling, offers of free advice and unusually high investment returns), and shows how clever these scammers are becoming.

Many con artists are moving away from much-warned-about pension liberation schemes and are instead employing more subtle techniques, such as offering free pension reviews and financial advice – these tactics could give consumers a false sense of security and instil a level of trust in the scammers, but these tricks are often the first step towards tricking people out of their pension pots.

Beware the cold call

The research highlighted that consumers are particularly at risk of being targeted by unsolicited phone calls, post and emails, with the figures showing that as many as 10.9m consumers have received this form of contact about their pension in the last year alone. Even more worryingly, 64% of respondents said they would consider an unsolicited offer about their pension, and rather than seeking professional advice, many would only consult informal sources about whether the offer was genuine.

Indeed, 45% said they'd look up the company's website to check whether the pension offer was legitimate, and 36% would discuss things with family, but neither of these can provide confirmation of legitimacy. The best way to be confident that an offer is genuine and that the company is authorised to give regulated advice is to make sure that it's listed on the Financial Conduct Authority's online register, something that only 33% of respondents said they'd do.

Gillian Guy, chief executive of Citizens Advice, commented on the findings:

"Fraudsters have shifted their tactics to rob people of a retirement income, [which means] it's difficult for consumers to stay ahead of pension scams as they evolve. Many scammers use professional-looking websites and leaflets to fool their victims into signing up to free pensions advice, or cold call with offers of unusually high investment returns.

"Before considering any kind of pension offer, you should check the Financial Conduct Authority's website to make sure the company is legitimate. If you are worried that you may have been targeted by scammers, you can get help and support from Citizens Advice, or if you are over 50, Pension Wise guidance can equip you with the knowledge of what to look out for to avoid falling victim to scams."

Top tips for identifying a pension scam

In order to help consumers avoid being the victim of pension fraudsters, Citizens Advice have issued these tips to help you identify potential scams:

  • Ignore any contact you receive out of the blue about your pension, whether it's in person, online, by phone or in the post.
  • Be cautious of companies offering high investment returns – it's probably too good to be true. In particular, watch out for any promotion that offers you more than an 8% return on your pension investment.
  • Be wary of any offer to access your pension before the age of 55. Accessing your pension early can mean you are hit with a high tax bill of 55%, and if you're encouraged to invest it elsewhere, you could lose all your pension savings in the scam.
  • Don't feel pressured to make a decision about your pension straight away. It's a huge decision and you need to take your time with it – if anyone's pressuring you, it's a key indicator that all is not as it seems.
  • Watch out for extravagant sounding investments based overseas.
  • Check the Financial Conduct Authority's (FCA's) online register to make sure the company approaching you is legitimate and registered to give financial advice.
  • If you're making an investment, check the FCA ScamSmart warning list before going ahead to make sure that it isn't a known investment scam.
  • If you're transferring a pension, ask your current pension provider to check the HMRC registration of the new scheme to check it's legitimate.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.