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Top pension scams to watch out for

Top pension scams to watch out for

Category: Pensions

Updated: 28/06/2016
First Published: 28/06/2016

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 It is now over 6 months old so the content may be out of date.

It's always important to be on your guard when it comes to pension scams, but perhaps even more so since the pension freedoms were introduced last year. Con artists are viewing this as a golden opportunity to access your cash, so to help keep your money safe, campaign group Pension Life has outlined the top five things you need to look out for to avoid becoming a victim of pension scams.

  1. Guaranteed returns. Being told that you'll get guaranteed returns should instantly set alarm bells ringing – nothing is guaranteed, particularly when it comes to investments, so anyone who makes that claim should be given a wide berth. "Scammers typically use the magic number of 8-9% growth per year for two to five years," said Pensions Life chairman Angela Brooks. "In the real world, there is no such thing as a guaranteed return; it's a hook to catch people who are, quite understandably, keen to grow or improve their pension."
  1. Speculative property. If you're promised spectacular growth opportunities from unusual property developments – particularly offshore – be on your guard. "The problem with property is that it is illiquid and not necessarily easy to sell," explains Angela. A pension fund needs to be liquid so money can be transferred out when necessary, but as Angela says, if it's all tied up in long-term, speculative property, it can take years to get out of the investment – and an early redemption may attract punitive penalties, too.
  1. Unregulated advisers and funds. Anyone claiming to offer you financial advice or services – pensions-related or anything else – should be regulated. If there's no regulation, there's no protection, which means that if you lost money or the fund went bust, you'd be highly unlikely to get anything back. Be particularly wary of phrases such as "Company X works in conjunction with a fully regulated and authorised company", warns Angela, as this usually means that Company X isn't regulated.
  1. Firms that look like advisers but aren't. It's important to be particularly wary of schemes that are presented by firms that appear to be advisers but claim that no advice is given, as you'd have little recourse if things went wrong. If the scheme goes bust, for example, the firm could try to claim that you weren't given advice – or that you weren't acting on their recommendation – and that it was up to the participants to decide whether it was suitable for them.
  1. Incorrect risk profiles. Angela says that determining an investor's risk profile is crucial, and it should always be properly determined before any major financial transactions so that investment recommendations respect the individual's risk appetite. Scammers, however, will often try and trick their victims into believing that they're "sophisticated" or "high risk" investors – when most of the time they'll be low risk – and will try to flog inappropriate and risky investments as a result.

The bottom line is to be on your guard. Remember that if anything seems too good to be true, it probably is, and always make sure you're dealing with a regulated firm – head to the Financial Conduct Authority's website to check – for complete peace of mind.

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.