How To Spot A Pension Scam?

The UK government is committed to countering pension scams. The Fraud Action team is planning a review of its flag system for the regular pension transfer. The new action plan will be launched for 2022 -2025 that involves strategies where the government will work with industries to eliminate the vulnerabilities to get justice to the victims, punish offenders, shut fraudulent infrastructure, and give higher support to consumers. 

The new plan will be based on data sharing and set up a multi-agency task force(Project Bloom). The government expects higher coordination from the industry intelligence with greater emphasis on reporting scams. 

The government agreed to focus on secondary scammers and plans to review the regulations associated with pension transfer within 18 months of activation. A further review of the plan can be made every three years to allow the flag system to keep track of the activities related to the account.

Pension fraud has increased since the introduction of pension freedom in April 2015, when people above 55 were allowed to withdraw cash from their pension plans, giving access to millions of pounds – that was not possible earlier. 

The HMRC is also exploring solutions to issues where financial scam victims are left with many tax bills and penalties. 

• Initially, a pension scam is difficult to track as it is promoted by some of the most convincing online stores or professional websites. The testimonials, reviews and brochures of these sites appear reliable. The tricksters contact people out of the blue through phone, text messages or emails and sometimes, they advertise it online. 

• They make fake claims to gain the trust of the prospective victim. They may claim to be from FCA-authorised firms, and sometimes, they do not need the FCA authorisation as they are not providing the advice on their own. 

• They claim they act on behalf of the government, but the aim is to convince the target to buy into their schemes and release the pension funds from their accounts into the firm’s account.

• They sometimes offer high returns schemes involving high-risk investments into sectors like overseas real estate, forestry, renewable energy bonds, etc.

• They may offer low-risk conventional products but hide the associated fees and multiple charges linked with the option.

• They often ask to transfer the fund directly into another account and decline to respond after gaining access to the money.

Since the coronavirus outbreaks, scammers are targeting pension pots of all sizes. In addition, the pandemic is impacting all firms, even those listed in the stock markets. As a result, the markets are volatile and may remain unpredictable. 

People facing financial problems during repeated lockdowns may try to make money through the pension funds, and the scammers may target victims interested in earning their pension money during the COVID crisis.

The Scammers May Offer – 

• A free pension review or higher returns guarantees higher returns on pension savings.

• They may help release cash from your pension account, even for those under 55.

• They may adopt high-pressure sales tactics to pressure the pension holder to invest in limited-time deals or send couriers/posts where they offer you to sign documents to get/ invest your money. Such offers are often unusual, unregulated and high-risk, and it may not be easy to sell them to others if you want the invested money back. 

• The complicated investment schemes and the arrangement of several parties can make it difficult for the investor to track all the processes and changes involved in the investment.

• Since the investment schemes are mostly long-term, for several years, one may not realise they invested in fake schemes, and remote access to the projects makes it impossible for the investors to visit the location of investment projects. 

• Moreover, the fraudsters often pretend they are helping you get your money back, and they may ask you to download an app to your device, which further gives them access to your bank and payment details.  

Simple Steps To Avoid It-

• Reject offers made out of the blue. If you are contacted by strangers from unknown sources asking for your pension details or bank details, hang up. Decline all forms of free pension advice.

• If you are asked to invest your pension money in any financial product or opportunity, get advice from a reputed financial expert or organisation. 

• If you get any unexpected email or text message related to pension offers, ignore it.

• Do not discuss your financial plans with a stranger, even if the caller is known in your friend or family group.

• Check with whom you are dealing. Sometimes, clone firms pretend to be genuine FCA-authorised firms. 

• Check the FCA register to learn more about the firm. Investors cannot get their money back if affiliated with unauthorised firms. Search for the company name, directors, and other details online to see if others have posted their concerns. Also, go through the FCA warning list to determine any risk to potential pension investment.

• One should not rush to make any financial decision, especially when investors claim they offer amazing deals. Be wary of investors who sound too good to be true, and do not rush to decide.

• Always seek impartial advice from the reputed agency before changing the previous pension arrangement. 

• If you suspect you have been scammed, contact the Consumer Helpline and fill in the reporting forms.

• Also, contact Action Fraud or contact the Pension Advisory services.

If you have already invested, fraudsters may contact you again to tell you ways to get your money back or sell your details to other criminals. 

The follow-up scams differ from previous frauds, where they may ask you to pay a small fee to get your invested money back. Always be aware of such tactics and protect the staff, clients and members from scams.